As the year draws to a close, Gulf OPEC producers have unanimously reiterated their stance on maintaining their current output as Brent crude lingers just below $60 a barrel – just over half of the peak the commodity reached in June this year.
OPEC’s decision to maintain overall output at 30 million bpd following its last major meeting in Vienna in November will hurt vulnerable member states such as Russia, Iran – both already suffering from Western sanctions and Venezuela. For its financially more well-off Arab Gulf producers, the situation is a challenge but one they can afford to weather, for the time being.
OPEC leader Saudi Arabia has predictably been the most vociferous saying that the only direction it would take its production is up in a bid to maintain its market position.
"Based on the analysis we have done, we will not cut output at OPEC,” Saudi Oil Minister Ali Al-Naimi (pictured) was quoted as saying in Abu Dhabi this week.
Gulf countries have some of the lowest oil production costs in the world compared to their non-OPEC counterparts and they are willing to use this to maintain their market share.
In a thinly-veiled snub to US oil producers who have gained from the shale boom, according to Reutrers, Al-Naimi is quoted to have said: “Let the most efficient producers produce.”
Interestingly, in an effort to solidify Saudi Arabia’s market share, Al-Naimi said that his country would even maintain its output of around 9.7 million bpd regardless of whether or not non-OPEC countries would cut their production.
His counterparts from the UAE and Kuwait seemed to sing from the same hymn sheet with both saying they would not cut production.
World oil markets are seeing a glut in the face of reduced demand due to weak economic conditions worldwide. Because this trend is expected to continue well into the new year, the ministers are effectively placing a long term bet that oil prices will recover at current output levels.
"We invite everyone to do what OPEC did and take a step to balance the market through not offering additional products in 2015, and if everyone abides by (the) OPEC decision, the market will stabilise and it will stabilise quickly," Reuters quoted UAE oil minister Suhail Al Mazroui as saying during the Organisation of Arab Petroleum Exporting Countries (OAPEC) meeting in the UAE capital.