Members of OPEC, the group that supplies 40 percent of the world’s oil, are engaged in an internal price war as they seek to preserve their share of an oversupplied market, Iraqi Oil Minister Adel Abdul-Mahdi said.
“There is a price war within OPEC,” Abdul-Mahdi told an evening session of the parliament in Baghdad on Thursday last week, which was broadcast on state-run television. “The market’s fundamentals have changed, with an extra 3 million barrels a day of crude entering the market at a time when growth in China and India has slowed.”
Crude prices have collapsed more than 20 percent from their June peak, meeting a common definition of a bear market.
Global supplies are rising as a shale boom spurs US production to the highest level in 30 years and demand grows at the slowest pace since 2009.
Saudi Arabia, the world’s top oil exporter, cut the price of its main crude export grade to Asia to the lowest in almost six years on Oct. 1, a move later matched by Iran.
“Saudi Arabia last month lowered its selling price by 75 cents on average as part of this price war, Iran has done something similar and we, in Iraq, lowered our price by 60 cents,” Abdul-Mahdi said.
The Saudis are scheduled to announce official selling prices for next month this week.
Asian traders are split on whether the kingdom is set to deepen the crude price cuts that propelled oil into a bear market. Seven respondents in a Bloomberg survey expected further discounts, six forecast prices would be unchanged and two anticipated an increase.
OPEC members boosted production to a 14-month high of 30.97 million barrels a day last month led by Iraq, Saudi Arabia and Libya, according to a seperate survey of oil companies, producers and analysts.
US oil production rose last week to the highest since at least 1983, according to the statistical arm of the US Department of Energy.
Brent crude, the international benchmark, is headed for a sixth weekly loss, the longest losing streak since 2002.
Both Brent and West Texas Intermediate (WTI), the US benchmark, are on track for their biggest monthly decline in more than two years.
December Brent futures were down 1.8 percent to US$84.70 a barrel on the ICE Futures Europe exchange in London at 2:06pm on Friday, while WTI fell 1.7 percent to US$79.72 a barrel on the New York Mercantile Exchange.
“The meeting planned by OPEC next month will discuss this matter and we hope to get an agreement on all issues,” Abdul-Mahdi.
The 12-member group is set for a showdown as Saudi Arabia is resisting calls to reduce production even as oil slides further, said Daniel Yergin, the vice chairman of IHS Inc consultants and Pulitzer Prize-winning author.
“Everybody will have their own saga as to why they should only cut from a more theoretical level, and I don’t think the Saudis are going to buy into that,” he said.
OPEC Secretary-General Abdalla El-Badri said OPEC is not engaged in a price war.
“Our countries are following the market. People are selling according to the market price,” he said at the Oil and Money conference in London on Wednesday last week.
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