In a press conference today following the EU-OPEC Energy Dialogue in Vienna, OPEC Secretary General Abdallah Salem el-Badri responded to questions regarding ongoing talks of a production “freeze,” and the April 17th meeting in Doha, Qatar, when oil producing countries will meet to discuss next steps. The Secretary General’s comments addressed issues related to how many countries would participate in the meeting, the effectiveness of the “freeze,” and the state of the ongoing market rebalancing.
“The price really went down to a level that we never thought would be achieved.”
When asked who would be attending the Doha meeting, el-Badri did not name specific countries, but said that 15-16 oil producing states would be in attendance. On the freeze, he commented, “We are seeing it now there is a positive impact, [the] price [has gone] from $27 to $40, let us wait and see what will happen, because the price really went down to a level that we never thought would be achieved.” On the upcoming meeting he said, “15-16 countries that are major producers will attend, it’s not a bad number.”
On the market rebalancing, he said, “We know OPEC cannot do it alone: It must be OPEC and non-OPEC producers together to find a solution. The invitation goes to all our member countries and will go to other non-OPEC countries and we’ll see who will reply and who will not, but I hope it will be a successful meeting.” He did not answer directly if he agreed with IEA’s assessment that oil prices may have bottomed.
Regarding Iran’s participation, el-Badri said, “Iran is not objecting to the meeting but they have some conditions about their production, and maybe in the future they will join the group.”
When asked if OPEC’s strategy of allowing the market to correct itself without production cuts was working, the Secretary General was optimistic. He said, “I think it’s working because non-OPEC production is declining very rapidly. It’s at the cost of too many idle rigs, and investment is declining from 2015 by 35 percent. So of course we go into the future, but there will be less supply.”
El-Badri mentioned that the massive supply overhang presents a challenge for market rebalancing, but downplayed its long term impacts. “The only problem I see is the overhang above the five year average. This is the problem we see in the market—if we can get rid of this 300 million barrels the oil price will come back to normal.”
“This is not the first time we have this high price low price, I saw this cycle five times. This cycle maybe is a little bit different because it was caused by supply of high cost, we will overcome it and the price will go to normal.”
When asked if there was any possibility of production cuts, el-Badri responded, “Let us go to the freeze first and then we’ll go to the future.”
Regarding the outcome of the OPEC-EU energy dialogue, Secretary General el-Badri and the Commissioner for Climate Action & Energy at the European Commission Miguel Arias Cañete emphasized their ongoing commitment to cooperation on achieving climate goals and improving energy efficiency. The last meeting between the two groups was in summer 2014, prior to the precipitous drop in oil prices. “Oil prices have fallen by more than 70 percent, many investments have been deferred or cancelled, manpower has been laid off, and the market has been searching for a supply-demand balance,” they said in a press statement. The groups noted their concern that the current low price environment is leading to severe underinvestment which has the potential to cause dramatic price swings in the future. “Such a massive fall in investment could in time lead to a supply shortfall and the risk of a sharp oil price rebound, as has been witnessed in the past.” The statement continued, “Oil price volatility and/or sharp price rises would be harmful for the economies of both the producing and consuming countries. An affordable and stable oil price, alongside a balanced and stable market, is a prerequisite for economic growth for both producers and consumers.”