The fall in oil prices did not soften the manners. Meeting in Abu Dhabi this weekend for a forum on energy, the Gulf monarchies have chosen to get tough with oil producing countries non-members of OPEC. Saudi Arabia, the leader of OPEC, and Kuwait have ruled out to cut production, even if non-OPEC countries decided in turn to tighten the taps.
“If they decide to reduce their production, they are welcome. (…) Saudi Arabia certainly will not reduce its,” said Saudi Oil Minister Ali al-Nuaimi. His Kuwaiti counterpart Ali al-Omair proved equally adamant: “I do not think we need to cut it down. We gave a chance to the others and they were not willing to do so. ”
Saudi Arabia and Kuwait are influential members of OPEC and they pump, with the United Arab Emirates and Qatar, some 16 million barrels per day (bpd), more than half of the production of the cartel’s twelve members. OPEC decided in late November in Vienna to maintain its production ceiling at 30 mbd despite oversupply and falling prices. Despite a rebound in recent days, a barrel of oil has lost about 50% of its value since mid-June. In Asian markets on Monday, the price of a barrel of “light sweet crude” (WTI) for delivery in February traded at 57.71 dollars, while the price of Brent North Sea for delivery at the same maturity was worth 62, 17 dollars.
Gulf ministers accuse producers outside OPEC to be responsible for the falling prices. Even if they are never mentioned, they allude to producers like Canada with its oil sands or the United States and its shale oil production. US production is about to reach its highest level for 42 years.
“One of the main reasons (of the price drop) is the production of some irresponsible producers outside of OPEC,” said Suhail al-Mazrouei, the UAE Minister of Energy. For his part, the Saudi Nuaimi also lamented “a lack of cooperation from the main producers outside OPEC, misinformation and greed of speculators.”
In these conditions, the OPEC ministers do not intend to lower their production and seem willing to let slip the course, even if this means a drop in fiscal revenues. At current prices, they would lose half their petrodollars, some $350 billion per year. But sustainable collapse of the black gold prices also make unsustainable investments in the production of non-conventional hydrocarbons, the production costs are estimated by analysts at about $50 a barrel.
Often accused of deliberately acting to keep prices low, Saudi Arabia, through the voice of Mr Nuaimi, rejected allegations on a “conspiracy” that Saudi Arabia would push prices down for political purposes, noting that the oil policy of his country was “based on purely economic principles.” Iran, a member of OPEC, and Russia, whose economies depend largely on oil revenues, spoke of a conspiracy designed to keep prices low in the oil markets.