Opec, which pumps around 40 per cent of the world’s oil, expects higher crude prices next year but is not yet ready to cut its output and risk allowing other higher cost producers the opportunity to grab market share.
“We are following the market day in day out, month in month out. We see that 2016 is really producing some positive results,” said Abdalla Al Badri, the organisation’s secretary general at the Adipec oil and gas conference in Abu Dhabi on Tuesday.
The 12-member organisation meets next on December 4 in Vienna to decide on its output policy which is focused on protecting market share rather than propping up prices by reducing its output. Opec kept its production ceiling at 30 million barrels per day (bpd) at its previous meeting in June.
“Opec is not really a swing producer as such,” said Mr Al Badri. ”We always protect our share in the market. Now we are 40 per cent. It is not possible to go lower than 40 per cent.”
The oil price glut, weaker demand in Asia and Europe, and a strong dollar has slashed the price of international crude benchmark Brent to less than US$50 a barrel from over $100 a barrel last year.
Mr Al Badri blamed non-Opec producers for the oversupply and criticised them for not heeding Opec calls for coordinating production in order to help boost prices.
“The non-Opec supply is the main reason for over supply in the market,” said Mr Al Badri. “We have to share the burden between Opec and non-Opec.”
Opec’s policy of protecting its market share has squeezed out high-cost producers such as shale oil companies in the US, which have seen their production decline this year.
US shale oil production is forecast to drop for an eighth month in a row to 4.95 million bpd in December, 118,000 bpd less than in November, the US Energy Information Administration said this week.
Growth in non-Opec oil supply could stop by 2020 if spending cuts continue to impact the industry, warned the International Energy Agency, the Paris-based energy advisor to industrialised nations.
The oil price rout has led to a 20 per cent drop in exploration and production investment to $130 billion this year from last year, Mr Al Badri said.
Non-Opec oil supply is forecast to contract by 0.13 million bpd next year, according to Opec estimates.
The demand for Opec crude next year is forecast to be 30.8 million bpd, 1.2 million bpd more than this year’s demand, according to the organisation’s estimates. Opec produced 31.57 million bpd in September, above its 30 million-bpd ceiling, mostly due to higher production in Iraq, Nigeria and the UAE, Opec said in its October monthly report, citing secondary sources.
Next year, global oil demand is set to rise by 1.25 million bpd to reach 94.11 million bpd next year, according to Opec estimates.
Follow The National’s Business section on Twitter