DUBAI: Petroleum and Mineral Resources Minister Ali Al-Naimi said OPEC will not cut oil production even if the price drops to $20 a barrel and it is unfair to expect the group to reduce output if non-members do not.
“Whether it goes down to $20 a barrel, $40, $50, $60, it is irrelevant,” Al-Naimi said in an interview with the Middle East Economic Survey (MEES), an industry weekly.
Al-Naimi defended a decision by the Organization of the Petroleum Exporting Countries to maintain a production ceiling of 30 million barrels per day.
The Kingdom pumps about 9.6 million barrels per day but Al-Naimi said it is “crooked logic” to expect his country to cut and then lose business to other major producers outside OPEC.
The increasingly competitive global oil market has seen daily US output rise by more than 40 percent since 2006, but at a production cost which can be three or four times that of extracting Middle Eastern oil.
“Is it reasonable for a highly efficient producer to reduce output, while the producer of poor efficiency continues to produce?” Al-Naimi asked during the interview conducted with MEES.
“If I reduce, what happens to my market share? The price will go up and the Russians, the Brazilians, US shale oil producers will take my share.”
Al-Naimi added it is “unfair” for OPEC to reduce output because it is not pumping most of the world’s oil.
We produce less than 40 percent of global output. We are the most efficient producer. It is unbelievable after the analysis we carried out for us to cut,” he said.
OPEC tried to seek market stability through a common front between members and non-members “but there was no way,” he said.
Repeating comments he has made elsewhere, Al-Naimi told MEES that oil prices will, however, improve.
“The timing is difficult to know,” he said, but international oil companies have reduced their future capital expenditures, “which means there is no exploration.”
That, in turn, signals they will not have additional production, he added.
The minister said OPEC was not surprised by the extent of the price drop.
“No, we knew the price would go down because there are investors and speculators whose job it is to push it up or down to make money,” he told MEES.
Al-Naimi said that with their comparatively low production costs of $4-$5 a barrel, Gulf nations and particularly Saudi Arabia “have the ability to hold out.”
Other nations would be “harmed greatly before we feel any pain,” he added.