Gulf states may reject Opec cuts to guard market share
Gulf oil producers led by Saudi Arabia will likely reject output cuts at an Opec meeting next week unless they are guaranteed their market share in a highly competitive market, analysts say.
The four pump a total 16.2 million barrels per day, or 52 per cent of the 12-member Organisation of Petroleum Exporting Countries, but they account for two-thirds of the group’s exports, according to figures from Opec and other agencies.
“Opec members are looking at Saudi Arabia, Kuwait and the UAE to shoulder the bulk of any production cuts, and they can,” said Kuwaiti oil expert Kamel Al Harami.
“But it is extremely unlikely for Gulf states to accept output cuts unless other Opec members take the initiative... They need assurances other Opec or non-Opec producers won’t fill the gap,” said the former oil executive.
“It is not in the interest of the Gulf states to cut output because they risk losing highly valuable market share,” he told AFP.
Oil prices have crashed to four-year lows on dampening demand from a combination of factors including a sluggish world economy, a sharp rise in output from unconventional sources like shale oil, and a strong dollar. This has resulted in slumping revenues for most Opec and non-Opec producers heavily reliant on oil for their budgets.
Venezuela has called for a meeting of both Opec and non-Opec countries to address the price slide, joining hands with Ecuador to urge the group to cut output.
“The fear of non-Opec producers boosting output will make most Opec members very cautious in accepting cuts,” said Khaled Bodai, head of the Horizon for Administrative Consultations. “I am not optimistic there will be an agreement for cuts,” Bodai, a former member of Kuwait’s Supreme Petroleum Council, told AFP. Kuwaiti Oil Minister Ali Al Omair said last week an Opec decision to cut output “will be very difficult”.
Saudi Arabia, the world’s top crude exporter, has not commented on possible output cuts but in early November it sent oil prices tumbling when it eased its crude price for the United States to preserve market share. “The focus at the moment is on Saudi Arabia and whether it will succumb to pressure from within the Opec and outside to cut production,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
Saudi economist Abdulwahab Abu-Dahesh said Gulf states would “fiercely resist pressure to cut output.” “The battle now is for market share, and if they cut output, they lose market share,” he said.
- Khaleej Times
- Published on:
- November 21, 2014
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