- Producer group sees 'no quick fix' for market instability
- Non-member nations would have to share burden of supply cut
OPEC, the producer of 40 percent of the world’s oil, renewed its readiness to talk to other crude exporters to achieve “fair and reasonable prices,” according to the group’s monthly magazine. Oil jumped to the highest in a month on the report.
“There is no quick fix, but if there is a willingness to face the oil industry’s challenges together, then the prospects for the future have to be a lot better than what everyone involved in the industry has been experiencing over the past nine months or so,” said the opening commentary in the OPEC Bulletin published Monday on the group’s website. “As the Organization has stressed on numerous occasions, it stands ready to talk to all other producers.”
Crude sank to a six-year low, losing more than half its value in the past year as Saudi Arabia, the world’s top exporter, led OPEC to reject demands from some of the other members like Algeria and Venezuela to cut supply in order to prop up prices. The group opted to maintain production in order to protect market share amid surging output from the U.S., Canada and other countries.
The 12-member Organization of Petroleum Exporting Countries stuck to the same decision at its last meeting in June, ramping up daily output in the past three months above 32 million barrels, the highest since 2012, on higher supply from Saudi Arabia and Iraq, while prices weakened after fellow member Iran struck a deal in July with world powers on its nuclear program that would free up its oil exports. OPEC has an official daily production target of 30 million barrels.
OPEC won’t agree to carry the burden of propping up oil prices by cutting supply and non-member nations would have to share the burden, according to the bulletin.
“This has to be on a level playing field,” it said. “OPEC will protect its own interests. As developing countries, its members, whose economies rely heavily on this one precious resource, can ill afford to do otherwise.”
West Texas Intermediate for October delivery surged $2.47, or 5.5 percent, to $47.69 a barrel at 12:39 p.m. on the New York Mercantile Exchange. The contract is up 24 percent since Aug. 26. Futures slipped as much as $1.62 to $43.60 earlier.
“If the wide-ranging projections on oil demand are correct, then it is just a case of riding out the storm and waiting for calmer waters to return,” the publication said, adding that demand growth in 2016 “augurs well for oil prices.”
Supplies from outside OPEC are expected to contract in 2016 for the first time since 2008, sliding by 200,000 barrels a day, the International Energy Agency said on Aug. 12. With consumption set to grow by 1.4 million barrels a day, OPEC and its de facto leader Saudi Arabia could seize the chance to broaden their market as competitors damaged by the price slump fall off.
“OPEC, as always, will continue to do all in its power to create the right enabling environment for the oil market to achieve equilibrium with fair and reasonable prices,” the group said in the magazine.
A March initiative by Algeria’s President Abdelaziz Bouteflika to organize a coordinated response to the oil price slump between OPEC and non-OPEC met no response. In a December interview to the Middle East Economic Survey, Saudi Arabian Oil Minister Ali al-Naimi said a meeting with non-OPEC producers Russia and Mexico in Vienna produced no result as the two nations declined to commit to supply cuts. The talks, also attended by Venezuela, were held before the November meeting where the decision to preserve market share was taken.