Oil producers group OPEC can ride out a slump in oil prices and keep output unchanged, its head said on Sunday, arguing market weakness did not reflect supply and demand fundamentals and could have been driven by speculators.
Speaking at a conference in Dubai, Abdullah al-Badri defended November’s decision by the Organization of the Petroleum Exporting Countries not to cut its output target of 30 million barrels per day (bpd) in the face of a drop in crude prices to multi-year lows.
“We agreed that it is important to continue with production (at current levels) for the … coming period. This decision was made by consensus by all ministers,” he said. “The decision has been made.
Things will be left as is.”
OPEC policy remains a crucial factor in global economic prospects after Brent crude settled at below $62 a barrel on Friday, following a steep descent which hammered energy stocks and currencies exposed to crude exports.
Kuwait’s oil minister Ali al-Omair said on Sunday OPEC’s decision to keep output unchanged was intended to retain market share, even if it had a negative impact on prices, state news agency KUNA said.
The move left benchmark grades at nearly half levels set earlier this year and doused appetite for riskier assets, pushing investors into the safety of government debt despite strong U.S. consumer sentiment.
In a further reaction to slumping oil, stock markets across the Middle East fell sharply on Sunday, adding to a plunge in Gulf equity markets which has wiped out roughly $150 billion of value since the end of October.
Some say selling may continue as few participants are yet willing to call a bottom for markets.
But Badri suggested the crude price fall had been overdone. “The fundamentals should not lead to this dramatic reduction (in price),” he said in Arabic through an English interpreter.
He said only a small increase in supply had lead to a sharp drop in prices, adding: “I believe that speculation has entered strongly in deciding these prices.”
Asked if OPEC planned an emergency meeting before its next scheduled gathering in June, or a meeting with non-OPEC producers, Badri said such meetings would not have an effect on oil prices. (Reuters)