- Saudi oil minister says OPEC is not willing to bear the burden of falling oil prices alone.
- Oil prices unlikely to return to $100-$120 any time soon, according to OPEC governor.
Global crude prices declined on Monday, after Saudi Arabia’s oil minister said OPEC was prepared to ride out the protracted market slump that has halved prices over the past ten months.
Brent for May delivery declined 1.1 percent to $54.72 a barrel. US benchmark West Texas Intermediate (WTI) tumbled 1.3 percent to $45.98 a barrel.
A weaker US dollar helped prop up commodities last week, with oil being one of the biggest benefactors. US crude climbed around 4 percent last Friday, posting its first weekly gain in more than a month.
Crude’s investment appeal has waned this month after prices rose by around a third between January and February. The rally has been held back by record-high US inventories, which have climbed at a relentless pace over the past ten weeks. The Energy Information Administration (EIA) is expected to show another large increase in stockpiles on Wednesday when it releases its weekly report.
The Organization of the Petroleum Exporting Countries (OPEC) is preparing to ride out the global supply glut, even if it means cheaper gas prices. On Sunday Saudi Arabia’s oil minister Ali al-Naimi said that the 12-member cartel was looking for support from non-OPEC producers to minimize the supply glut. Those efforts appear to have failed.
“We tried, we held meetings and we did not succeed because countries were insisting that OPEC carry the burden and we refuse that OPEC bears the responsibility,” al-Naimi said.
Last November OPEC vowed to keep production levels above 30 million barrels per day, sending shockwaves throughout the market. Investors were expecting the cartel to reduce output to mitigate a steeper fall in prices, which later materialized in late-2014 and early-2015. In fact, the cartel has exceeded its production target for nine consecutive months. Iran, which is a member of the 12-nation group, is looking to increase exports following an agreement with the United States on its nuclear program.
Al-Naimi added that “everybody is supposed to participate if we want to improve prices.”
OPEC is responsible for approximately 30 percent of the global petroleum market.
US production is expected to slow in the latter half of the year. Prices are expected to remain low for the foreseeable future, with WTI forecast to fall to as low as $40 a barrel. According to a recent forecast by Bank of America Merrill Lynch, Brent will average around $52 a barrel this year.
A price recovery north of $100 a barrel will be very difficult to come by, according to OPEC governor Mohammad al-Madi.
“I think it’s difficult to reach $100 or $120 another time,” al-Madi said at an energy conference in Riyadh.