The Organization of Petroleum Exporting Countries (OPEC) is expected to hold an extraordinary meeting in “early March” to address the free-falling crude oil prices in the international market, Minister of State for Petroleum Resources, Dr Ibe Kachikwu disclosed on Tuesday.
“We did say that if it (the price) hits the 35 (dollar per barrel), we will begin to look (at)… an extraordinary meeting. The prices have hit levels that necessitate a meeting,” Kachikwu who is the current OPEC President told an energy forum in Abu Dhabi.
The US crude oil price tumbled below $31 a barrel Tuesday, extending a sell-off that has pushed it to more than 12-year lows amid a global supply glut, a strong dollar and tepid demand.
Saudi-led Gulf exporters within OPEC have so far refused to cut production to curb sliding prices, seeking to protect their market share despite a heavy blow to their revenues.Kachikwu, said that member states differ on the issue of intervention.
“One group feels there is a need to intervene. The other group feels even if we did, we are only 30 to 35 percent of the producers really, as 65 percent of supply comes from non-OPEC countries”, he said at the Gulf Intelligence UAE Energy Forum.
“Unless you have this 65 percent (of) producers coming back to the table you really won’t make any dramatic difference,” he added.
UAE Energy Minister Suhail bin Mohammed al-Mazroui later told the same conference the current OPEC strategy was working, adding that time was needed to allow this to happen — perhaps between one and one and half years.
“I’m not convinced OPEC alone can change or can solely unilaterally change this strategy just because we have seen a low in the market,” Mazroui said.
Mazroui added that while the first half of 2016 would be “tough” for the oil market, there would be a gradual recovery later in the year, aided by an expected drop in non-OPEC production.
The Nigerian minister did not specify which OPEC members want a meeting. OPEC’s next scheduled meeting is not until June 2. But two OPEC delegates from outside the Gulf were sceptical an emergency conference would take place. “There won’t be any meeting,” said one of the OPEC delegates from an African country.
OPEC’s strategy of maintaining production levels, instead of reducing supply to allow prices to recover, has been aimed at defending market share at the expense of higher-cost producers such as those in the U.S. shale sector.
The supply glut is likely to be exacerbated in 2016 by the return of Iranian supply to the market, once Western sanctions have been lifted.
“I think all the members including Iran have the right to increase their production. I don’t think we are going to restrict anyone,” Mazroui said.
Such prospects have led oil analysts to downgrade their forecasts in recent days, with Standard Chartered saying prices could drop to $10 a barrel.
The likelihood of a meeting taking place will hinge on the attitude of OPEC heavyweight Saudi Arabia, which has been at the vanguard of resistance to a production cut.
“Saudi Arabia has never held the position that it does not want to talk,” Kachikwu said. “In fact, it was very supportive of a meeting before June, at the time when we held the December meeting, if (there was a) consensus call for it.”
U.S. benchmark West Texas Intermediate (WTI) for February delivery was down around 2.8 percent, at $30.54 per barrel, in Asian trade on Tuesday.
European benchmark Brent North Sea crude fell 3.1 percent, to $30.57.
The last time prices were so low for WTI was in December 2003 and in April 2004 for Brent.
Prices plummeted 10 percent last week on fears about the global supply glut and weakness in China, the world’s biggest energy user.
By Olisemeka Obeche (With agency reports)