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 The delegates, some of which are from core Gulf OPEC producing
countries, said they may not see - and some may not even welcome now
- a return to $100 any time soon. Once deemed a “fair” price by many
major producers, $100 a barrel crude is encouraging too much new
production from high cost producers outside the exporting group,
some sources say.
But they believe that once the breakneck growth of high cost
producers such as U.S. shale patch slows and lower prices begin to
stimulate demand, oil prices could begin finding a new equilibrium
by the end of 2015 – even in the absence of any production cuts by
OPEC, something that has been repeatedly ruled out.
"The general thinking is that prices can’t collapse, prices can
touch $60 or a bit lower for some months then come back to an
acceptable level which is $80 a barrel, but probably after eight
months to a year," one Gulf oil source told Reuters.
A separate Gulf OPEC source said: "We have to wait and see. We don't
see 100 dollars for next year, unless there is a sudden supply
disruption. But average of 70-80 dollars for next year – yes.”
 The comments are among the first to indicate how big producers see
oil markets playing out next year, after the current slump that has
almost halved prices since June. Global benchmark Brent closed at
around $60 a barrel on Monday.
Their internal view on the market outlook will provide welcome
insight to oil company executives, analysts and traders, who were
caught out by what was seen by some as a shift in Saudi policy two
months ago and have struggled since then to understand how and when
the market will find its feet.
NOT AGAIN
For the past several months, Saudi officials have been making clear
that the Kingdom’s oft-repeated mantra that $100 a barrel crude is a
“fair” price for crude had been set aside, at least for the
foreseeable future. At the weekend, Saudi Oil Minister Ali al-Naimi
was blunt when asked if the world would ever again see triple-digit
oil prices: “We may not.”
Saudi Arabia, the world’s biggest exporter – and its close Gulf
allies within the Organization of the Petroleum Exporting Countries
(OPEC) – say it’s time for others, whether that is countries like
major exporter Russia or U.S. shale drillers, to slow down; OPEC can
no longer slash output, ceding market share, to spare them a
downturn.
As Naimi told the Middle East Economic Survey (MEES) in an interview
this weekend: “It is not in the interest of OPEC producers to cut
their production, whatever the price is.”
Without OPEC to defend prices, oil entered a free-fall, but most of
OPEC’s members are holding fast.
At this point, intervening in the market would simply invite new
rivals to carry on pumping crude, eroding OPEC’s market share
without any guarantee of a sustained price recovery, another Arab
oil source told Reuters on the sidelines of a meeting in Abu Dhabi
of the Organization of the Arab Petroleum Exporting Countries
(OAPEC).
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"Every time prices fall, we would be asked to cut," the source said.
The second Gulf OPEC source reiterated that OPEC would not cut
alone. Non-OPEC producers such as Russia, Mexico, Kazakhstan and
"anyone producing more than one million barrels per day" should also
cut or at least freeze their output if they wanted a stable market
and better prices, the Gulf OPEC source said.
NO PRICE TARGET
To be sure, there is no suggestion that OPEC is targeting a specific
price, or would want to do so. The group hasn’t had a formal price
goal in about a decade, and Saudi Arabia has long maintained that it
is only seeking price stability, not a set level.
But it offers a convenient metric at a time when traders are
struggling to figure out where and when markets will settle down.
Asked about market signals OPEC is looking for to decide on whether
the market is stabilizing or not, irrespective of the price, Naimi
said: "The signals need time, one year, two years, three years.
There is not one signal that we look to and say that's it... but for
sure those who are the most efficient producers are the one who
would rule the market in the future."
Iraqi oil minister Adel Abdel Mehdi told Reuters in an interview on
Monday he thought prices would stabilize now at about $60 a barrel
but could rise to over $70 by mid-next year.
"I believe that market has started to stabilize itself now," Falah
al-Amiri, head of Iraq state oil marketing SOMO told Reuters in Abu
Dhabi.
"The future for next year, I don't think there would be much
optimism in the market that the price would go to $80 or above. But
I don't even think prices would reach $80," said Amiri, citing a
resilient shale oil production to current prices.
(Editing by William Maclean, Will Hardy and Jonathan Leff)
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