Nigeria’s top oil official used a panel at the World Economic Forum in Davos, Switzerland, to bluntly plead for an emergency meeting of the Organization of the Petroleum Exporting Countries. Other member states of OPEC, a cartel of some of the world’s biggest producers, have quietly lobbied for such a meeting for months.
But on Thursday, Nigerian Oil Minister Emmanuel Ibe Kachikwu made one of the strongest, public calls yet by an OPEC member. He asked the group to convene, in part to help convince other producing countries to join forces and throttle back on production to bolster prices.
There is a “lot of energy around trying to meet earlier…obviously some of that is a panic reaction,” he told a panel in Davos.
“Do we just sit back and watch,” he asked, “or do we put more efforts in talking to countries, like Russia, to try to get some consensus of what we need to be doing?”
OPEC, which controls more than one-third of the world’s crude oil supply, historically has used its production level to move prices up or down—typically up—in times of crisis. But over the past year, Saudi Arabia, the group’s largest producer by far, has abandoned that role, opting to pump record levels of crude in 2015 to maintain market share. Near-record output in the world’s two other big producers, the U.S. and Russia, and surging production in Iraq, have all created a global glut that has helped send prices down to levels not seen in more than a decade.
Mr. Kachikwu’s call underscores the economic crisis in which many of the world’s biggest oil producers—inside and outside OPEC—find themselves. In Nigeria, the government has imposed capital controls to arrest the fast depletion of foreign reserves, while the currency and the country’s stock market have plummeted. In Venezuela, which relies on oil for virtually all of its exports, the drop in prices has devastated its centrally planned economy. President Nicolás Maduro’s leftist government is struggling to pay for imports of basics ranging from cancer medication to car batteries. Triple-digit inflation and chronic shortages of food and other goods have generated hourslong supermarket queues.
The Russian ruble on Thursday hit a fresh, all-time low against the dollar. In Canada, a plummeting currency there has jacked up consumer prices for imported goods and food.
The intense maneuvering over production cuts amid the broader economic strife was on full display over the course of a single panel session in Davos on Thursday. While Mr. Kachikwu called on fellow OPEC members to meet, Azerbaijan President Ilham Aliyev, in the same panel, vowed his oil-rich country would join in any OPEC cuts.
The chairman of Saudi Arabia’s state oil company, however, seated nearby at the event, echoed Riyadh’s long-held refusal to agree to any unilateral OPEC cut.
Earlier this week, Oman said it would slash output by up to 10% in coordination with other countries, in an effort to stabilize the oil market. Mr. Aliyev on Thursday told the Davos audience his oil-rich country also now was willing to cut.
“If we have more coordination between OPEC members and large non-OPEC members with respect to the reduction of production then maybe we can have results,” Mr. Aliyev said.
But any broad-based move to coordinate cuts would need to be endorsed by two of the biggest producers—Saudi Arabia and Russia—both of whom so far have indicated they will continue to pump to preserve their market share.
Riyadh, cushioned so far by the kingdom’s vast foreign reserves, hasn’t been immune to the oil bust. The kingdom has cut sharply its budget for this year, reduced some energy subsidies and embarked on an aggressive effort to publicly list many of its state-owned enterprises, both to attract foreign investors and raise cash.
Still, Khalid al-Falih, the chairman of Saudi Arabia Oil Co., or Saudi Aramco, told the same Davos audience that the kingdom could withstand low prices “for a long, long time. Obviously, we don’t hope for that, but are prepared for it.” He said Saudi Arabia can’t be expected to “withdraw production to make way for others.”wsj
No comments:
Post a Comment