Petroleum and Mineral Resources Minister Ali Al-Naimi told fellow OPEC members in Vienna that they must combat the US shale oil boom, arguing against cutting crude output in order to depress prices and undermine the profitability of North American producers.
Ali Al-Naimi won the argument at Thursday’s meeting, although ministers from members such as Venezuela, Iran and Algeria had wanted to cut production to reverse a rapid fall in oil prices.
A Gulf delegate told Reuters that Al-Naimi had reassured members that the oil price would recover as demand will ultimately pick up. But he insisted that if OPEC cut output it would lose market share.
“Reaching a final decision took a lot of time convincing the others,” said another delegate.
Some members were not prepared to offer big cuts themselves, and, choosing not to clash with Saudi Arabia and their allies, ultimately agreeing to Al-Naimi’s suggestion.
“Al-Naimi spoke about market share rivalry with the US. And those who wanted a cut understood that there was no option to achieve it because Saudi Arabia wants a market share battle,” a source, who was briefed by a non-Gulf OPEC minister after Thursday’s meeting, told Reuters.
Oil hit a fresh four-year low below $72 per barrel on Friday.
A boom in shale oil production and weaker growth in China and Europe have sent prices down by over a third since June.
Secretary General Abdullah Al-Badri effectively confirmed OPEC was entering a battle for market share.
Asked on Thursday if the organization had a answer to rising US production, he said: “We answered. We keep the same production. There is an answer here.”
OPEC agreed to maintain — a ‘rollover’ in OPEC jargon — its ceiling of 30 million barrels per day, at least 1 million above its own estimate of demand for its oil in the first half of next year.
“We are together,” said Venezuelan Foreign Minister Rafael Ramirez when asked whether there was a price war within OPEC.
“OPEC is always fighting with the US because the US has declared it is always against OPEC... Shale oil is a disaster as a method of production, the fracking. But also it is too expensive. And there we are going to see what will happen with production,” he said.
Analysts, quoted by Reuters, said the decision not to cut output in the face of drastically falling prices was a strategic shift for OPEC.
Al-Naimi: OPEC ‘must combat US shale boom’
Al-Naimi: OPEC ‘must combat US shale boom’
