OPEC alone can't be held responsible for setting the price of oil worldwide, a veteran oil minister says, and it's time for producers outside the cartel to help set acceptable prices for oil.
Abdullah Bin Hamad Al Attiyah, who served as Qatar's oil minister for nearly 20 years, says the 30 percent drop in the price of oil since mid-June has left OPEC's 12 members disunited on how to shore up revenues.
"OPEC can't balance the market alone," Al Attiyah told Bloomberg by telephone on Nov. 19. "This time, Russia, Norway and Mexico must all come to the table. OPEC can make a cut, but what will happen is that non-OPEC supply will continue to grow. Then what will the market do?"
The Paris-based International Energy Agency reports that worldwide demand for oil is expected to experience its lowest increase in five years, to only 92.4 million barrels per day, then accelerate next year along with improvement in the global economy. Meanwhile, a domestic shale oil bonanza is putting the United States on a path to energy self-reliance.
Until prices began to fall in June, OPEC was enjoying prices of more than $100 per barrel because it cut production to 30 million barrels per day in 2011. All that changed in June when competition from non-OPEC members set prices falling. That created an oil glut of about 2 million barrels a day, Al Attiyah said, sending benchmark Brent crude below $80 per barrel this month.
This market saturation also is cutting deeply into the government revenues of non-OPEC countries including Iran, Venezuela and Russia.
OPEC is set to hold a summit on Nov. 27, and the atmosphere at its Vienna headquarters is likely to be much different from those of the past, Al Attiyah told Bloomberg. "OPEC had been enjoying easy meetings, and decisions were taken without a sweat. Now the situation is different."
The answer, he said, is to ask non-OPEC members to cut their own production to stabilize prices. But even OPEC itself may not decide at its meeting to reduce its own production. Venezuela has been calling for a production cut, but so far Saudi Arabia, the cartel's biggest and most influential producer, has indicated no support for such a move.
Norway, home to the global energy giant Statoil, was quick to reject the idea of reducing its own production. "A stable oil market with prices at a reasonably high level is important for both oil-producing and oil-consuming countries," Norwegian Petroleum and Energy Minstry spokesman Ella Bye Morland said. "Limiting Norwegian oil production today is not appropriate."
If other non-OPEC countries take a similar stance, then the onus of the price of oil will fall wholly on OPEC's shoulders. Some commodity fund managers say that if the cartel doesn't vote to reduce production by at least 1 million barrels per day, the price of a barrel could plunge further, to as low as $60.
"The market would question the credibility of OPEC and its influence on global oil markets if there was no cut," one commodity fund manager, Daniel Bathe of Lupus Alpha Commodity Invest Fund, told Reuters.
Despite the stakes, Bathe said there was only a 50 percent chance that OPEC would agree to a production cut.