Opec will not cut oil production even if the price drops to $20 a barrel and it is unfair to expect the cartel to reduce output if non-members do not, Saudi Arabia has said.
“Whether it goes down to $20 a barrel, $40, $50, $60, it is irrelevant,” the kingdom’s Oil Minister Ali al-Naimi said in an interview with the Middle East Economic Survey, an industry weekly.
In unusually detailed comments, Naimi defended a decision by the Organisation of the Petroleum Exporting Countries (Opec), whose lead producer is Saudi Arabia, last month to maintain a production ceiling of 30 million barrels per day.
The decision sent global crude prices tumbling, worsening a price drop that has seen them fall by around 50% since June.
Saudi Arabia has traditionally acted to balance demand and supply in the global oil market because it is the only country with substantial spare production capacity, according to the International Monetary Fund.
The kingdom pumps about 9.6 million barrels per day but 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 United States oil output rise by more than 40% 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?” Naimi asked during the interview conducted with Mees on Sunday.
“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.”
He added it is “unfair” for the cartel to reduce output because it is not the world’s major oil producer.
“We produce less than 40% of global output. We are the most efficient producer. It is unbelievable after the analysis we carried out for us to cut,” he told MEES.
In Asian trade on Tuesday prices nudged higher on hopes of improved economic figures from the United States.
US benchmark West Texas Intermediate crude for February delivery gained 64 cents to $55.90 while Brent crude for February was up 33 cents to $60.44 in afternoon trade.