Gulf ministers meet in Doha to weigh oil policy

GCC oil ministers met in Doha on Thursday amid renewed pressure to curb the world oil glut.

Mohammed Al Sada, Qatar’s energy and industry minister, said after the meeting that ministers were weighing a proposal from their Venezuelan peer to call a summit of Opec and non-Opec ministers to discuss action to stem the slide in oil prices.

Crude prices last month averaged US$47 a barrel, down $10 from July, and have more than halved since last year.

A statement by the Kuwait oil ministry on the eve of the meeting maintained that “the Doha meeting is considered pivotal in view of the fluctuations in the global oil industry and the push for stability” in oil prices.

But analysts see little possibility of substantial action soon.

“Lower prices are painful, but they’re also necessary to clear the market of the higher cost production,” said Emma Richards, an oil analyst at BMI Research. “The GCC are also among those best-positioned to weather the storm. So while their finances will be coming under strain, I don’t think it’s posing the kind of systemic threat that could force them to act.”

There seems little point to calling a meeting of major oil exporters, as Venezuela has called for again. Alexander Novak, the energy minister of Russia, the largest non-Opec exporter, yesterday said his country would not cut production, as it would likely only have a short-term impact on the market.

“Shale oil has been leaving the market bit by bit. This is a good and positive signal that allows one to say that the market will stabilise in the medium term,” Mr Novak said on Russian television.

The US Energy Information Agency confirmed in its monthly short-term outlook evening that US crude oil production fell 140,000 barrels per day last month compared to July. The EIA forecast that US production would fall from 9.2 million bpd this year to 8.8 million bpd next year before recovering as oil prices rose gently.

“I don’t really think there is much that the GCC countries can do,” said Jason Tuvey, an analyst at Capital Economics.

“The oil boom is over and, fortunately for them, they saved a large chunk of their windfall over the past decade, which means they are in a far better position to cope than other oil producers. And, at the end of the day, I don’t think the Saudis would be willing to cut oil production only to help out their regional rival, Iran,” which is expected to increase oil output next year as soon as sanctions related to its nuclear programme are lifted.

Another item GCC ministers had on their agenda was “the possibility of unifying prices of oil products in the GCC countries”, according to the Kuwait oil ministry. This was was taken to mean they would discuss following the UAE’s lead and liberalising fuel markets.

“The idea of unifying petrol prices is an interesting one,” Ms Richards said. “It may be there are concerns over smuggling, which is a problem in places … where the subsidies are very uneven and fuels are moved from heavily subsidised countries to unsubsidised ones,” which inflates the cost to governments, she noted.

According to Mr Tuvey, the UAE’s move made clear that some countries were willing to cut subsidies further and faster than others.

“In Saudi Arabia, for example, I suspect subsidy cuts are still some time away,” he said. “As we’ve argued before, capital spending is more likely to take the hit well before current spending, and thus household incomes.”

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