OPEC nations can withstand a drop in crude prices to the lowest in more than five years, while shale drillers will probably be the first to curb production amid the collapse, the United Arab Emirates’ energy minister said.
Oil slumped almost 50% last year, the most since the 2008 financial crisis, amid a supply surplus that the U.A.E. and Qatar estimate at 2 million barrels a day.
The Organization of Petroleum Exporting Countries is battling a US shale boom by resisting production cuts, signaling its readiness to let prices fall to a level that slows American output, which has surged to a three-decade high.
“Everyone needs to take measures, but those who are producing the most expensive oil — the rationale and the rules of the market say that they should be the first to pull or reduce their production,” Suhail Al Mazrouei, the UAE minister, told reporters today in Abu Dhabi.
“If the price is right for them to produce, then fine, let them produce. If the price is not right, then they will reduce.”
US crude slid below $45 a barrel today, falling to the lowest level since March 2009. Goldman Sachs Group Inc. (GS) and Societe Generale SA (GLE) cut their price forecasts, while Venezuela called on its fellow producers in OPEC to work together to lift prices back toward $100 a barrel.
Brent for February settlement slid $1.60, or 3.4 percent, to $45.83 a barrel on the ICE Futures Europe exchange at 8:25 a.m. London time. West Texas Intermediate decreased $1.23 to $44.84 a barrel in New York.
“It’s unlikely we will see a sudden rise,” Mazrouei said today at an Abu Dhabi conference organized by Dubai-based consultants Gulf Intelligence.
“The current prices are not sustainable. Not for us but for the others.”
Crude prices will be dictated by the highest-cost producer, and shale wells will switch on and off according to price, he said.
The UAE, the fifth-largest OPEC member, pumped 2.7 million barrels a day last month and has a production capacity of 3 million barrels a day, according to data compiled.
The Persian Gulf nation will stick with a plan to boost its capacity to 3.5 million barrels a day in 2017, in spite of the global supply glut, Mazrouei said yesterday in Abu Dhabi, the UAE capital.
“In this time of unstable oil prices, we are showing in Abu Dhabi and across the country that we remain dedicated to reach our long-term production goals,” he said yesterday. “Our investments remain there.”
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