OPEC Keeps Production Levels and Dismisses Shale “Scarecrows”
Oil ministers from Organization of the Petroleum Exporting Countries (or, OPEC) member countries see no reason to temper oil production in 2014. Saudi Oil Minister Ali Al-Naimi said he is “optimistic the market will stay balanced and stable next year,” and that shale gas will not threaten either Saudi Arabia or OPEC. Al-Naimi was speaking at a meeting of the Organization of Arab Petroleum Exporting Countries (or, OAPEC) in Doha, Qatar.
Al-Naimi forecast stability for the oil market in 2014. ”God willing, there will not be any oversupply. We know that the world consumes more than 30 billion barrels a year, and any new supply will be welcome,” Al-Naimi said. The Times of Oman carried his remarks, as well as those by other OPEC leaders.
Kuwaiti Oil Minister Mustafa Al-Shemali also does not perceive shale gas to be a threat. ”OPEC can meet demand for years to come, so don’t make shale oil a scarecrow for OPEC and other producers,” he remarked. Oil Minister for Libya, Abdulbari Al-Arusi, reportedly said the country is ready to use force to reopen rebel held oil export ports. Iran is also preparing to return to the world-oil stage, now that sanctions on the country by the U.S. have been eased.
When OPEC met in early December, the group decided to maintain production levels of 30 million barrels a day for purposes of market stability. It will keep current levels, even though it noted that the increased demand for oil in 2014 “will be more than offset by the projected increase in non-OPEC supply.” In October, Reuters reported the U.S. had surpassed Saudi Arabia as the world’s largest oil producer. The International Energy Agency (IEA) says that the U.S. will be the top oil producer–pushing past Saudi Arabia and Russia–by 2016 at the latest. Reuters spoke to Fatih Birol, the IEA’s Chief Economist after that agency’s report was released.
Birol said that, “Up to 2020, we expect the light, tight oil to increase. But due to the limited resource base (of U.S. tight oil), it is going to plateau and decline. After 2020 there will be a major dominance of Middle East oil.” Until that date, U.S. production is not leveling off. the EIA expects production to increase by 56 percent between 2014 and 2040. By 2020, it believes the U.S. will be producing close to 9.6 million barrels per day, an historical high set in 1970.
Robin Mills, head of consulting at Manaar Energy Consulting and Project Management in Dubai, told Bloomberg that OPEC “will have to cut or accept lower prices.” He added that even without extra production by Iran, and Libya, “OPEC will be under pressure.”