Oil ministers from OPEC’s three biggest members rejected the possibility of a glut in global crude supply next year amid an increase in U.S. output and efforts by Iran and Libya to add barrels to the market.
The Organization of Petroleum Exporting Countries, which provides about 40 percent of the world’s oil, won’t need to cut production in 2014 because growth in demand can absorb the additional crude, the ministers from Saudi Arabia, Iraq and Kuwait said yesterday after a meeting of Arab oil exporters in Doha, Qatar.
U.S. benchmark West Texas Intermediate crude climbed to a two-month high on Dec. 20 after a report showed the U.S. economy expanded in the third quarter at a faster rate than previously estimated. WTI for February delivery rose 28 cents to $99.32 a barrel in New York.
“Do you know why WTI traded near $100 in the past few days? It’s because the market is in fear of a shortage of oil and not in fear of oversupply,” Saudi Oil Minister Ali al-Naimi told reporters. “The market reflects the situation.”
OPEC agreed when it last met on Dec. 4 to keep its output target unchanged at 30 million barrels a day because the market is balanced, said al-Naimi, whose country is the group’s largest producer. Commerzbank AG said in a Dec. 10 report that OPEC would need to reduce output should Libyan and Iranian production return to the market.
OPEC “will have to cut or accept lower prices,” Robin Mills, head of consulting at Manaar Energy Consulting and Project Management in Dubai, said by telephone today. “Even if Libya and Iran don’t come back, OPEC will be under pressure.”
Exports from Libya plummeted this year as political strife and labor protests shut oil fields, refineries and ports. The North African nation will resort to force if necessary to reopen the ports, its minister Abdulbari al-Arusi told reporters yesterday. The shutdown has cut Libyan output to 250,000 barrels a day from 1.4 million barrels a day in March.
Iran wants to raise output to 4 million barrels a day, the country’s oil minister, Bijan Namdar Zanganeh, said at this month’s OPEC meeting, after a Nov. 24 agreement on the country’s nuclear program opened the door to an easing of economic sanctions. Iran pumped 2.65 million barrels a day in November, according to data compiled by Bloomberg.
Kuwaiti Oil Minister Mustafa al-Shemali said the group doesn’t need to change its target in the next six months as the market is expected to remain stable, “with no bumps,” until OPEC meets next in June.
“There will be an increase in supply over the coming months, but there will be an increase in demand as well,” he told reporters yesterday. “No one is competing with anyone in the market.” Kuwait was OPEC’s third-largest producer last month, data compiled by Bloomberg show.
Iraq, second-biggest in the group, plans to increase production capacity next year and each year after that until it can pump 9 million barrels a day in 2020, the country’s oil minister, Abdul Kareem al-Luaibi, said in an interview in Doha yesterday.
“There is no need for any country among OPEC to cut output next year, as the increase in demand will absorb any increase in supply,” he said. “Over the past three years OPEC was successful in stabilizing prices by keeping the market in balance, and this will continue.”
Saudi Oil Minister al-Naimi said the increase of oil production from shale in the U.S. doesn’t threaten OPEC or his country.
“We welcome any new supply that will meet the world’s energy needs whether it’s gas or oil,” al-Naimi told reporters.
The additional supply from shale oil will help replace the 30 billion barrels of crude oil that the world produces every year, he said.
“Replacing this amount of crude requires huge investments and as oil fields get older, producers need to drill new wells and every new well is more expensive than the previous,” he said.
U.S. shale oil is poised to increase the country’s crude production to 9.6 million barrels a day in 2016, a level it last reached in 1970, the U.S. Energy Information Administration said Dec. 16.
“OPEC can meet demand for years to come, so don’t make shale oil a scarecrow for OPEC and other producers,” Kuwaiti Oil Minister Al-Shemali said. “The market has enough room for all of us.”
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