Oil prices will not rebound to US$100 a barrel because increased prices would draw more shale and other output from higher-cost producers to the market, Saudi Arabia’s governor for OPEC Mohammed al-Madi said.
“I think it will be difficult to reach US$100 or US$120 another time,” al-Madi said at a conference in Riyadh on Sunday. “This will let the high-cost producers come back again.”
Saudi Arabia, the nation leading OPEC in defending its share of the global oil market, will keep investing to maintain its current output capacity, al-Madi said.
Brent oil, the global benchmark, declined almost 50 percent in the past year as Saudi Arabia and others in the oil cartel committed to maintain output amid a global surplus. US output is the highest in three decades as drillers pump crude from shale.
“Shale oil companies are one of the high-cost producers that benefited from high oil prices,” al-Madi said. “We’re not against shale oil. We welcomed shale oil, but it’s not fair for high-cost producers to push low-cost producers out of the market.”
OPEC’s role in the oil market has not been undermined by the drop in prices since its Nov. 27 meeting in Vienna when it chose market share over production cuts, al-Madi said.
“If OPEC could have controlled the prices it would have done so, but it is not in the interest of OPEC to control the prices,” al-Madi said. “It is OPEC’s interest to achieve balance in the market. The price should be decided by the market, and the market is subject to supply and demand.”
The world needs US$40 trillion of oil investments in the next two decades to meet growing demand led by emerging nations, he said.
Demand will grow 1 million barrels a day every year for the next 15 years to about 111 million barrels a day, Saudi OPEC national representative Nasser al-Dossary said at the same conference on Sunday.
Saudi Arabia produced 9.85 million barrels of crude a day last month, the most since September 2013, according to data compiled by Bloomberg. US output reached 9.42 million barrels a day this month, the highest rate in weekly Energy Information Administration data going back to 1983.
Brent crude climbed 1.6 percent on Friday to US$55.32 a barrel, down from US$115.71 a barrel in June last year.
“If producers don’t keep investing now, we will have problems in 20 years,” al-Madi said.
Saudi Arabia holds a “big role” to keep unity within the OPEC, which supplies about 40 percent of the world’s oil, al-Madi said. In the past 55 years, OPEC and non-OPEC producers cooperated on production cuts 19 times. Russia, which is not part of OPEC, did not always follow through when cuts were promised, he said.
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