- Energy minister Coldwell sees 18-24 more months of low prices
- Mexico willing to attend oil countries' meeting if invited
Oil prices won’t recover until the second half of next year at the earliest, Mexican Energy Minister Pedro Joaquin Coldwell said, joining a chorus of industry leaders and officials predicting a long period of low prices.
The forecast suggests more pain for the energy industry and oil-rich countries as global benchmark Brent crude trades near its lowest in 12 years. Mexico, which is not an OPEC member, is willing to participate in a meeting with OPEC and non-OPEC producers to discuss a potential output freeze, Coldwell said in an interview Wednesday at the IHS CERAWeek conference in Houston. He and Saudi Oil Minister Ali al-Naimimet Tuesday to discuss the oil market, he said.
“The oil-price recovery is going to take a long time,” Coldwell said. “I believe a price recovery could take a year and half to two years to happen.”
Al-Naimi said Tuesday at the same conference that the accord to freeze production marked “the beginning of a process” that will continue with further discussions among producing countries in March. Venezuela said later in the day that Saudi Arabia, Russia and other leading oil producers were discussing meeting next month on the market.
Mexico, currently the world’s 10th-largest producer according to the U.S. Energy Information Administration, was the architect of a series of oil production cuts in 1998 and 1999 involving OPEC and several non-OPEC nations that revived prices.
2 Million Barrels
The market is oversupplied by about 2 million barrels a day, Coldwell said, equivalent to the consumption of France. With oil inventories increasing every day, the International Energy Agency warned Feb. 9 that it was “very hard to see how oil prices can rise significantly.” Mexico isn’t likely to cut output at this time, Coldwell said.
“Mexico hasn’t contributed to the current oversupply,” he said, adding that the country’s output has declined roughly 1 million barrels a day during the last 10 years.
Al-Naimi said Tuesday that Saudi Arabia, the world’s largest oil exporter, won’t cut output. Instead, he suggested high-cost producers needed to either “lower costs, borrow cash or liquidate,” adding: “It sounds harsh, and unfortunately it is, but it is the most efficient way to rebalance markets.”
Oil prices plunged 40 percent over the last year after the Organization of Petroleum Exporting Countries said in November 2014 that it wouldn’t cut its production to control prices at a time when U.S. shale drillers were increasing output.
Ecuador, one of OPEC’s smallest producers, has cut its average crude-price forecast for this year to $25 a barrel, President Rafael Correa said Wednesday in a statement in the presidential gazette.
The rout in oil prices has unfolded as Mexico, Latin American’s second-largest economy after Brazil, seeks investments to develop its aging energy sector. Last year, the country ended a monopoly that for 76 years gave Petroleos Mexicanos the exclusive rights to drill for oil and produce motor fuels and also welcomed foreign investors.
Although Mexico is in part shielded against low prices through a series of oil hedges, the country is already cutting public spending to weather the crisis. For 2016, Mexico hedged its oil exports at an average $49 a barrel. Last year, Mexico reaped a payment of $6.4 billion from its hedge, the largest since the Latin American country started to use financial derivatives to lock-in oil revenues in 1991.