OPEC leader Saudi Arabia and fellow member the United Arab Emirates signaled on Wednesday they were unlikely to push for a major change in oil output at the group's meeting this week to prop up prices that have collapsed by a third since June.
Saudi Oil Minister Ali al-Naimi said he expected the oil market “to stabilize itself eventually” after talks with non-OPEC member Russia on Tuesday yielded no pledge from Moscow to tackle a global oil glut jointly.
OPEC's meeting on Thursday will be one of its most crucial in recent years, with oil having tumbled to below $79 per barrel due to the U.S. shale boom and slower economic growth in China and Europe.
Core Gulf oil producer the UAE sided with Naimi, saying oil prices would soon stabilize, while ramping up pressure on non-OPEC producers.
“This is not a crisis that requires us to panic ... we have seen [prices] way lower,” UAE Oil Minister Suhail bin Mohammed al-Mazroui told Reuters. “I think everyone needs to play a role in balancing the market, not OPEC unilaterally.”
Iranian Oil Minister Bijan Zangeneh said some OPEC members, although not Iran itself, were now gearing up for a battle over market share and also insisted that non-OPEC producers needed to participate in any OPEC-led output cut.
“Some OPEC members believe that this is the time where we need to defend market share ... All the experts in the market believe we have oversupply in the market and next year we will have more oversupply,” he added.
Cutting output unilaterally would effectively mean for OPEC, which accounts for a third of global oil output, a further loss of market share to North American shale oil producers.
If OPEC decided against cutting and rolled over existing output levels on Thursday, that would effectively mean a price war that the Saudis and other Gulf producers could withstand due to their large foreign-exchange reserves. Other members, such as Venezuela, would find it much more difficult.
Among the 12 members of the Organization of the Petroleum Exporting Countries, Venezuela and Iraq have called for output cuts. Naimi has not commented on what the group should do.
“The onslaught of North American shale oil has drastically undermined OPEC's position and reduced its market share,” said Dr. Gary Ross, chief executive of PIRA Energy Group. Brent crude was trading flat at 1320 GMT, above $78 per barrel.
Russia skeptical on OPEC cut
Russia, which produces 10.5 million barrels per day (bpd) or 11 percent of global oil, came to Tuesday's meeting amid hints it might agree to cut output as it suffers from oil's price fall and Western sanctions over Ukraine.
But as that meeting with Naimi and officials from Venezuela and non-OPEC member Mexico ended, Russia's most influential oil official, state firm Rosneft's head Igor Sechin, emerged with a surprise message - Russia will not reduce output even if oil falls to $60 per barrel.
Sechin added that he expected low oil prices to do more damage to producing nations with higher costs, in a clear reference to the U.S. shale boom.
Many at OPEC were taken by surprise by Sechin's suggestion that Russia - in desperate need of oil prices above $100 per barrel to balance its budget - was ready for a price war.
“Gulf states are less bothered about a price drop compared to other OPEC members,” an OPEC source close to Gulf thinking said.
On Wednesday, Russian Energy Minister Alexander Novak said the country's energy companies would produce around the same amount of oil next year as they did in 2014.
He told reporters in Moscow he was skeptical that OPEC would decide on Thursday to cut output quotas.
OPEC's own publications have shown in recent months that global supply will exceed demand by more than 1 million bpd in the first half of next year.
While the statistics speak in favor of a cut, the build-up to the OPEC meeting has seen one of the most heated debates in years about the next policy step for the group.
An OPEC delegate from one of the smaller oil producers suggested on Wednesday that the group's meeting could be prolonged.
“They must agree, even if they have to stay here for two days. It is a matter of death or survival for budgets,” the delegate said.
“It might take a bit longer than the ordinary meetings.”
