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Kuwait’s oil minister said the nation’s decision to back an unchanged Organization of the Petroleum Exporting Countries (OPEC) production limit last week was to ensure the group preserves market share amid a global glut. Expanding output from U.S. shale supplies helped cause that excess, his United Arab Emirates counterpart said.
“Everyone wants you to reduce your production while they increase theirs and drown the market,” Kuwait’s Ali Al-Omair told parliament, the state-run Kuwait News Agency reported. “We have to maintain our market shares and continue with a production that covers our needs.”
U.S. shale producers increased output faster than global demand growth warrants and must help to tackle the resulting surplus, U.A.E. Energy Minister Suhail Al-Mazrouei said on his Twitter account. The two nations joined Saudi Arabia and Qatar in resisting calls to curb output from the other eight members of the OPEC, five people briefed on the group’s Nov. 27 meeting said.
Brent crude plunged 36% this year amid speculation some OPEC nations were seeking to preserve market share rather than curb output in response to an excess. Saudi Arabia’s Oil Minister Ali Al-Naimi mentioned expanding U.S. shale supplies as a reason not to curb output during last week’s meeting, according to Bijan Zanganeh, who holds the same role in Iran.
Brent crude slumped 6.7% on the day of the meeting, the biggest drop in three years. It traded at $70.69 a barrel in London on Dec. 3, an increase of 15 cents from its close Dec. 2. West Texas Intermediate retreated 10% on Nov. 28. The meeting was held on Thanksgiving. It was up 27 cents at $67.15 a barrel at 1 p.m. in London on Dec. 3.
Exceeding Demand
“Some shale oil producers have pumped volumes exceeding global demand growth,” said Mazrouei, the U.A.E. minister. “It is logical that it’s the one who flooded the market that has to modify supply especially if he is the first to be affected by the price decline.”
The OPEC meeting was split between those who backed an output cut to support prices, led by Venezuela, and those who didn’t, led by Saudi Arabia, the group’s largest producer and the world’s top crude exporter, according to the five people. The Saudi-led group prevailed as the other eight members are financially strapped and not in a position to implement any production cut themselves.
“The kingdom is not going to give up market share at this time for anybody, and allow producers whether in Russia, Nigeria, Iran or other places, to sell oil to Saudi customers because we cut our production,” Prince Turki Al-Faisal, a former head of Saudi intelligence, said in London at an event organized by the European Council on Foreign Relations.
Global oversupply exceeds 1.8 MMbbl/d, said Kuwait’s Al-Omair. An oil price recovery will have to wait for the period of slow economic growth and crude oversupply to be over, he said.
“Nobody has the intention to wage a price war, all are hurt when the price falls,” said Mazrouei. “It’s logical that the price at which is expected stabilize will be determined by the producer who has the highest cost of production; we are not seeking a specific price and we will accept the market price.”
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