Saudis see oil rebound as U.A.E. urges non-OPEC supply cuts

Saudis see oil rebound as U.A.E. urges non-OPEC supply cuts

MAHMOUD HABBOUSH, WAEL MAHDI and ANTHONY DIPAOLA

ABU DHABI (Bloomberg) -- Saudi Arabia and the United Arab Emirates reiterated pledges to keep pumping the same amount of crude, blaming non-OPEC producers for the glut of oil that’s driven prices to the lowest in five years.

Suppliers from outside the Organization of Petroleum Exporting Countries should cut “irresponsible” output, U.A.E. Energy Minister Suhail Al Mazrouei said in Abu Dhabi. Even if non-OPEC producers were to offer cuts, OPEC probably wouldn’t follow suit, Saudi Oil Minister Ali Al-Naimi said. The two countries account for about 40% of OPEC supply.

Oil fell about 20% since OPEC chose to maintain its production target at a Nov. 27 meeting, seeking to defend market share rather than prices. The highest U.S. crude output in at least three decades is contributing to a glut that Qatar estimates at 2 MMbopd. Saudi Arabia is confident prices will rebound as economic growth boosts demand and “inefficient producers” trim output, Al-Naimi said.

“OPEC’s recent decision to leave production targets unchanged now places greater pressure on non-OPEC output to rebalance an oversupplied market,” analysts from ANZ Banking Group Ltd. including Melbourne-based Mark Pervan wrote in an emailed report. “Expanded production by all OPEC members next year would likely cause sharper falls in prices.”

Non-OPEC Supply

OPEC produced more than its 30 MMbopd target in each of the past six months, data compiled by Bloomberg show. Non-OPEC production will expand 2.3% next year to 57.84 MMbopd after climbing 3.5% this year, the International Energy Agency forecast in a Dec. 12 report.

“Irresponsible production from outside OPEC is behind the fall in prices,” Mazrouei said. “We call on all other producers to stop the increase.”

Brent gained 0.5% to $61.71/bbl on the London-based ICE Futures Europe exchange at 11:34 a.m. local time. It increased 3.6% on Dec. 19. West Texas Intermediate added 0.4% to $57.35/bbl.

Crude tumbled into a bear market this year as oil extraction soared at shale formations in Texas and North Dakota as companies split rocks using high-pressure liquid, a process known as hydraulic fracturing. The increase in demand was also less than expected, at about 700,000 bopd instead of the 1.2 MMbopd projected, Al-Naimi said.

Decades Ahead

“The oil market will recover,” he said. “Fossil fuel will remain the main source of energy for decades to come.”

Saudi Arabia has 265 Bbbl of oil reserves, and will increase refining capacity to 3.3 MMbpd by 2017 from 2.1 MMbpd in 2014, Al-Naimi said. It’s also looking to more joint ventures in downstream projects abroad.

The nation wants to become an international hub for climate change and carbon emissions research, he said. Al-Naimi attended United Nations global warming talks in Lima, Peru, this month.