Members of the Organization of Petroleum Exporting Countries (Opec) and non-members are considering holding the first Heads of State meeting in nearly a decade to tackle the issue of falling oil prices, Qatar’s Energy Minister has said.
Speaking at the end of a one-day meeting of GCC oil ministers in Doha yesterday, Dr. Mohammed bin Saleh Al Sada confirmed that an emergency summit of leaders of oil-producing states is being studied.
This followed a statement made last week by Venezuelan President Nicolas Maduro, saying he had put the proposal to Qatar’s Emir Sheikh Tamim bin Hamad Al Thani when he met with him in Qatar, and that the Emir had “liked” the idea, Reuters reported.
Venezuela is calling on Opec leaders to decrease production to help boost prices, but those cuts would reportedly have to be shouldered by Gulf countries including Saudi Arabia and Qatar, among others, which all have excess spare capacity.
Addressing reporters in Doha yesterday following the 34th session of the GCC Petroleum Cooperation Committee, newswire AFP reports Al Sada as saying:
“The (Venezuelan) president has proposed a summit meeting and this was announced. Now various countries are studying the proposal. Whether Opec and non-Opec producers agree to such a proposal remains to be seen.”
Previous summits
If it does go ahead, it would be the first time since 2007 that Opec has held a heads-of-state meeting.
That summit in Saudi Arabia was in very different circumstances, when oil prices were soaring and hit $147 a barrel a year later.
In the last year, the price of oil has more than halved from over $100 a barrel last June to less than $48 for brent crude, as global supply has increased.
Venezuela, which joins Qatar as two of the 12 members of Opec, has been particularly badly hit by falling global oil prices, and has been pushing for months for Opec to meet with Russia to take action to halt the slide.
Speaking yesterday, Maduro said its oil dropped to just $39 a barrel yesterday, Reuters said.
Saudi reluctance
While the proposal may at least be on the table, there has been resistance from other Opec states in the Gulf, as Kuwait, Saudi Arabia and the UAE see no need to meddle in the market, or even consider cutting production.
Saudi’s oil minister Ali Al-Naimi declined to comment officially on the prices yesterday, saying: “The earlier remarks by Qatar’s Al-Sada were enough.”
However, Reuters quoted an unnamed source as saying that the kingdom does not see the point of a summit if it would fail to produce concrete action toward defending oil prices.
“If we are meeting for the sake of meeting, it would backfire,” an Opec source added.
Earlier this week, Qatar’s Finance Minister maintained that it would be “business as usual” for the state’s multi-billion dollar infrastructure and development projects, despite the drop in oil prices.
Unlike some of his Gulf counterparts, Ali Shareef Al Emadi also ruled out cutting state fuel and food subsidies for nationals.
However, in the last year a number of public and private sector firms in Qatar have undergone “reorganization,” cutting staff, slashing budgets and scaling back projects that are not directly connected to hosting the World Cup in 2022.
Thoughts?
And what will be the purpose of the summit I don’t understand, now the fundemanetals of oil are changing with shale and the U.S. Will start exporting soon, too much oil in the market and China is drowning ?!
Venezuela wants to limit oil output to push prices because their economy is in absolute tatters and they desperately need the money.
Saudi and the rest of the GCC want to wait the low prices out and let the market be flooded because the cost extracting oil is very cheap for us, the cost of extracting oil in Saudi is the cheapest in the world.
The new methods employed by the U.S are an expensive method and continuing low prices of oil will force those practicing the new methods to go out of business since they need high oil prices to achieve a profit, Saudi is playing the long game, they learned from their past mistake of limiting oil supply that led to Norway and England to start extracting their own oil and that lessened not only the price of oil but the power of the OPEC.
China is a huge manufacturer of goods that isn’t as rich in natural resources, they need oil and gas, they’re a huge buyer but with their economic downturn and the drop in manufacturing there is less demand for oil, hence lower oil prices.
An interesting fact is that falling oil prices are considered a sign to a slowing global economy because oil is used in so many industries that less demand for it means there is less work being done.
Regardless of all that we all know why the oil prices have dropped.
The jews did it.
The cost of extracting oil is low for the GCC countries but their budgets are not based on the selling price and not the extraction price. The oil companies may not be losing money but the public sector is definitely suffering with budgets based on $65+ oil prices (ands that’s for the conservative GCC countries)
Based on ??55
So what you are saying we don’t have to worry about low oil prices and instead we have to worry about the Jews ?!
Sorry but that was yesterday’s dynamic, the world has moved on since then. Oil will still be needed for certain things, but the days of sky high prices have gone. (We may get a dead cat bounce but it will be temporary)
But your right, it was probably the Jews, all those that invested in kosher solar panels….
The North American shale oil will always be there though. Sure, it is costlier to extract, but there are massive reserves of it. This will cap the price. OPEC can cut output, but as long as oil remains over profitable shale costs, the market will correct itself. Temporarily putting some of those businesses out of production does not make the oil go away. It is still there, getting more efficient and cheaper to extract by the day.
As far as the long game, technology also becomes more efficient and the world is moving to renewables in solar, wind, etc. The demand for O&G will diminish and these OPEC countries produce absolutely nothing else whatsoever. Have fun with the giant sand boxes in the next few decades.
And the Iranians have a large stockpile that they are just waiting to get to market.
So it doesn’t look good isn’t it!
Not good at all, it is a runaway train heading towards $25/barrel.
Their plan, (Saudi) has gone badly wrong and now the genie is out of the bottle they can’t put it back. OPEC doesn’t have the clout it had twenty years ago as their market share is not decisive anymore. Iran, Venezuela and Russia are hurting bad but Saudi and Qatar can ride it out for a couple of years at least. However with Saudi burning through reserves at an alarming rate and now issuing debt something is going to have to give. Both countries either need a fundamental change in their economies allowing inward investment (non citizens owning businesses and given permanent residences) in non o&g or a cut in benefits and subsidies for citizens.
I don’t see either of those things happening, so Saudi will probably descend into civil war in the next ten to fifteen years.
HAHA! very nice sum up of the path everyone knows we Saudi and the GCC in general is heading towards.
Putting pressure on shale made it more efficient and less costly, this is the Saudi strategy and instead now Saudi is hiring Japanese company to start shale production!
Correct and with countries like Germany producing over 30% electricity through renewables the end is nigh. It won’t be sudden but they are not prepared for low oil future and do not want to prepare. When Saudi tears itself apart after 70 years of a religious dictatorship and sectarian violence ripping up the social fabric, Qatar, UAE and Bahrain will not be immune. It’s going to be a disaster and maybe we will see more Arab refugees heading to the evil west…… (The rich Saudis will already be there, having got out a long time before)
That’s ok the Gulf countries will use the oil internally and impose taxes on people, problem solved?
With a tax rate on citizens of about 80% they might just about break even……
So how countries without oil and imposes taxes on their citizens do it?!
Well if we look at America who have a high standard of living like gulf citizens, they make iPhones, Ford cars, Levi Jeans, have large companies that build stuff like Bechtel, KBR, they have a large financial services industry, even in stuff like food they sell all around the world, be it McDonald’s or coke.
What does the GCC produce? How does it earn money to build their economies outside of O&G?
So we are in deep kaka ?
Not only that, all expats will be gone, so you will have to learn how to deal with kaka.
I prefer to deal with kaka than some of the expats here.
Lol
Those are the ones that will go last 🙂
Not necessarily, but it requires some hard decisions for the future. Maybe Qatar can do it and the UAE but for Saudi I can offer little hope
Maybe, if those countries’ sovereign funds are intact and able to generate adequate income for the state while the tough decisions are being mulled
How is that going to work? At the moment, you sell oil, get cash and buy, say, a Rolls Royce or a huge teddy-bear. If you use oil internally, you can’t sell it, you can exchange it at best for Rayyan water, hamour and locally grown cucumbers. Actually, wait, why would one exchange hamour for oil…
You summed it up well. This article from about a month ago explains it further.
“OPEC now faces a permanent headwind. Each rise in price will be capped by a surge in US output.”
http://www.telegraph.co.uk/finance/oilprices/11768136/Saudi-Arabia-may-go-broke-before-the-US-oil-industry-buckles.html
The Minister’s plan is genius: let’s get together and talk and who knows, perhaps we are going to come up with something good. The Saudis just don’t get it.
You are all wrong look at this graph
Did you draw that? Source please 🙂
Morgan Stanley
http://www.businessinsider.com/morgan-stanley-evolution-of-the-oil-cycle-through-2018-2015-9
Haha, just like those people that always says when the stock market is high now is a good time to invest, “look at this chart, it’s going higher don’t miss out!”
It’s MORGAN STANLEY!
The same people that were balls deep in the sub prime crisis in 2007 and didn’t see that coming…… These people are idiots and are only interested in making themselves richer.
Can you dig out the report or graph from Morgan Stanley predicted the oil price crash as well?
Wishful thinking. $25/bbl for most of 2016, mark my words
I think Qatar and the other GCC countries are fully aware that the old OPEC doesn’t exist anymore and that it is currently a dysfunctional group of countries with different strategies and hidden agendas. Why would OPEC cut their output by 5 million barrels a day (at least) when they know American shale companies will be able to compensate for the decrease in output in a matter of months, and eventually reap all the profits from the temporary surge in prices.
What is shocking is the absence of any clear, reasonable and feasible post-oil plan for any of the GCC countries. For now, it is all talk and all the GCC countries still rely heavily on oil and on foreigners to make the economy work.
The Last
Ship Season 2 Episode 13 Full
http://watchseries.netseries.tv/serie/269533-TV/2/13