The United Arab Emirates said on Tuesday that OPEC will no longer move to shore up crude prices, arguing that rising North American shale oil output needs to be curbed.
World prices have been falling since June but the pace of the slide accelerated in November when the Organisation of the Petroleum Exporting Countries (OPEC) decided to maintain its production unchanged at 30 million barrels per day.
Analysts say that richer cartel members like the UAE have been ready to accept the price fall in the hope that it will force higher-cost shale producers out of the market.
“We cannot continue to be protecting a certain price,” UAE Energy Minister Suhail al-Mazrouei said.
“We have seen the oversupply, coming primarily from shale oil, and that needed to be corrected,” he told participants in the Gulf Intelligence UAE Energy Forum in Abu Dhabi.
Oil prices continued their slide towards six-year lows in Asian trade on Tuesday after Brent crude closed below $50 a barrel the previous day for the first time since April 2009.
The fall came after Wall Street investment titan Goldman Sachs slashed its price outlook, adding to anxiety about global oversupply, weak demand and soft growth in the key Chinese and European markets.
Brent crude for February delivery fell $1.33 to $46.10 a barrel — around its lowest point since April 2009.
US benchmark West Texas Intermediate shed $1.13 cents to $44.94 — its weakest level since March 2009.
Mazrouei said the UAE remains “concerned” about balance in the oil markets but “cannot under any circumstances be the only party responsible,” in reference to rising output from non-OPEC members.
Oil producers outside the cartel should be rational about their output, he said, adding that current prices are “not sustainable” for them.
“We are telling the market and other producers to be rational, to be like OPEC and look at growth in the market,” Mazrouei said.
He said that if OPEC had opted to cut production, other producers would have stepped in to make up the lost output and the cartel would have lost market share without any effect on prices.
Mazrouei said current prices were “not sustainable,” particularly for producers outside the Gulf region.
He said that with oil below $50 a barrel, it was uneconomic for shale oil producers to keep investing in increasing production.
“Shale oil brings almost four million (barrels per day) for the United States, and the hope is that it will bring another four million by 2020. That cannot be sustained, produced or invested in at the current oil price,” he said.
Mazrouei said he did not expect a swift recovery in prices.
“It is unlikely that we’ll see a sudden rise,” he said.