Opec leader vows not to cut oil output even if price hits $20
Opec will not cut production, even if the oil price falls to $20 a barrel, the cartel's de facto leader said, spelling out a dramatic policy shift that will have far-reaching implications for the global energy industry.
In an unusually frank interview, Ali al Naimi, the Saudi oil minister, tore up Opec's traditional strategy of keeping prices high by limiting oil output and replaced it with a new policy of defending the cartel's market share at all costs.
"It is not in the interest of Opec producers to cut their production, whatever the price is," he told the Middle East Economic Survey. "Whether it goes down to $20, $40, $50, $60, it is irrelevant."
He added that the world may never see oil at $100 a barrel again.
The comments, from a man who is often described as the most influential figure in the oil industry, marked the first time that Mr Naimi has explained the strategy shift in detail.
They represent a "fundamental change" in Opec policy that is more far-reaching than any since the 1970s, said Jamie Webster, oil analyst at IHS Energy.
"We have entered a scary time for the oil market and for the next several years we are going to be dealing with a lot of volatility," he said. "Just about everything will be touched by this."
Analysts say Saudi Arabia is throwing down the gauntlet to all the high-cost sources of crude - from Canada's oil sands and US shale, to deepwater Brazil and the Arctic - to try to face down the threat they pose to its market share.
Mr Naimi said that if the kingdom reduced production, "the price will go up and the Russians, the Brazilians, US shale oil producers will take my share."
Oil has slumped nearly 50 per cent since mid-June amid a massive supply glut fuelled by surging US shale output, combined with weakening demand in Europe and Asia.
In the past, Opec has cut production when prices fall, such as during the 2008 financial crisis. But at the cartel's meeting in Vienna last month members held output steady at 30m barrels a day, sending prices into a tailspin.
The price plunge has thrown the economies of big oil exporters like Russia and Venezuela into disarray and forced oil companies across the world to rewrite their investment plans.
But it could prove to be a major boon for the global economy. The International Monetary Fund said yesterday that a prolonged price slump would boost global growth by up 0.7 per cent in 2015 and 0.8 per cent in 2016.
China would be the biggest beneficiary, with its gross domestic product boosted by up to 0.7 per cent in 2015 and 0.9 per cent in 2016.
Oil prices fell further as markets digested Mr Naimi's remarks. Brent crude, the international oil marker, was down $1.08 to $60.30 a barrel, after falling as low as $59.84 in afternoon trading. It is now hovering at five-and-a-half year lows.
Ali al Naimi said that the world may never see oil at $100 a barrel again.
Copyright The Financial Times Limited 2014
(c) 2014 The Financial Times Limited