As Goldman Sachs’ prediction of $20 oil price gathers momentum, it’s no wonder oil producing nations are at loggerheads. The price is currently propping up around $27, the lowest since 2003. The two oil producing nations used a Davos forum to debate production levels were OPEC nations Nigeria and Saudi Arabia. Nigeria is calling for production cuts in an effort to boost the price. The country is reeling at the moment as the budget gap widens, given the country’s benchmark oil price for the year was $38. The oil industry also represents around 10 percent of the country’s GDP, given latest numbers. On the other Saudi Arabia refuses to bow to the pressure, and will only reverse course if non-OPEC nations play their part in cuts. And while the Kingdom says oil at $30 is ‘irrational’, it can handle low prices for a ‘long, long time’. The big question is how low can Saudi Arabia go, and when it gets to that point, will it be too late. A fascinating contest that’s brought relief to consumers around the world. – Stuart Lowman
By Javier Blas, Angelina Rascouet and Grant Smith
(Bloomberg) — Less than two months after OPEC nations sparred over oil policy in Vienna, they resumed the debate at Davos.
Nigeria’s oil minister, speaking on a panel at the World Economic Forum in the Swiss resort, said the Organization of Petroleum Exporting Countries needs to meet soon as crashing prices force the group to reconsider its current laissez-faire policy. Saudi Arabia, represented by the chairman of its national oil company, said the kingdom won’t reverse course unless non-OPEC nations play their part in production cuts.
“If there are other producers willing to collaborate, Saudi Arabia will be willing also to collaborate,” said Khalid Al- Falih, chairman of Saudi Arabian Oil Co., also known as Saudi Aramco. “But Saudi Arabia will not accept the role of — by itself — balancing a structural imbalance that is happening today.”
Read also: A Davos-based prediction on the oil price – not great news for SA
Officials from two non-OPEC nations speaking on the same panel — Azerbaijan and Russia — didn’t hold out much hope they’d be able to resolve the impasse soon.
Emergency Meeting
Nigeria’s petroleum resources minister of state, Emmanuel Kachikwu, made the case that the African nation and several fellow OPEC states want to meet before the group’s scheduled June 2 summit as the pain from $30 oil intensifies.
There’s “a lot of energy” around a possible early OPEC meeting, Kachikwu said in a subsequent Bloomberg Television interview. While it’s uncertain whether such a gathering will take place, “everybody is agreed on one thing: prices today are not good enough,” he said.
Read also:Â How low can you go? Oil falls below $28 as Iran sanctions lifted.
Venezuela, which has declared a state of economic emergency, has formally written to other members of the group to request a crisis meeting, according to five people familiar with the matter.
OPEC set aside the daily production target it had breached for 18 straight months at its Dec. 4 meeting in Vienna. Guided by its biggest producer Saudi Arabia, OPECÂ has increased output in an oversupplied market in a bid to force higher-cost producers to scale back their operations.
Where the two OPEC members agreed in Davos was that cooperation with outside producers is necessary to stabilize the market, and that a rebound from the current slump is inevitable.
While it’s a “very bleak picture” for the oil market in the short term, “the market has overshot on the low side, and it’s inevitable to start turning up,” Al-Falih said. The investment cuts triggered by low prices coupled with annual demand growth of 1 million barrels a day will lead to a recovery, he said.
BP joins other producers at #WEF16 in #Davos in painting gloomy outlook for oil https://t.co/acVf5qtDfv pic.twitter.com/qM0H9g8hkb
— Bloomberg (@business) January 22, 2016
An accord between Russia and OPEC is possible, “but at the right time,” said Kirill Dmitriev, CEO of the Kremlin-backed Russian Direct Investment Fund. Once the economic impact of cheap oil is clearer — “maybe within a year” — it’s “going to be much easier to sit down and agree.”
A spokeswoman for the Russian Energy Ministry said the nation’s position on cooperation with OPEC remains unchanged; Russia is ready to hold consultations with the organization. Russian Energy Minister Alexander Novak has said on several occasions the country is ready to hold discussions with OPEC, but considers artificial production cuts senseless.
Azeri President Ilham Aliyev said that although his country is “ready” to engage with OPEC, an agreement would really hinge on cooperation between OPEC and “large” producers outside the group. Azerbaijan’s production, at about 800,000 barrels a day, is less than a 10th of Russia’s.
If there’s no emergency OPEC meeting, Azerbaijan’s Aliyev joked he would actually be relieved. “Unfortunately, after every OPEC meeting, the price of oil goes down,” he said.
