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وول ستريت جورنال تقتبس من الدكتور الصبان لإلقاء الضوء على اجتماع أوبك القادم

The Organization of the Petroleum Exporting Countries Knows It Must Cut
Production to Lift Prices; Unclear is Whether Its Members Will Agree
By BENOÎT FAUCON,  SUMMER SAID and ANDREW PEAPLE
Nov. 16, 2014 8:43 p.m. ET

As global crude prices plunged earlier this month, Venezuela’s foreign
minister asked to see Saudi Arabia’s top oil official at a climate-change
conference on Margarita Island, off the South American coast.
 
 
Ali al-Naimi, the Saudi oil minister, was expecting a plea to reduce oil
output and bolster markets. In anticipation, according to people familiar with
the matter, he brought a message to Venezuelan Foreign Minister Rafael Ramirez
: Saudi Arabia won’t cut production on its own.
 
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Mr. Naimi is expected to repeat the message to delegates at a meeting of the
Organization of the Petroleum Exporting Countries in Vienna later this month,
according to Saudi officials and fellow OPEC officials.
 
At stake is whether OPEC, a group of some of the world’s biggest oil
producers, can still operate as a global cartel amid infighting and expanded
global production, notably from the U.S. shale-oil boom. A failure to broker a
deal for a collective cut would weaken the group’s already-sagging influence
over global prices.
 
ENLARGE

“The upcoming OPEC meeting is going to be the most difficult one during this
century,” said Mohammad al-Sabban, a former senior adviser to Mr. Naimi.
“It seems that OPEC has forgotten how to cooperate.”
 
Within the group, officials are increasingly worried its divisions contribute
to weaker prices. “If OPEC fails to reach an agreement,” one OPEC official
said, “oil prices will keep on falling.”
 
The group now pumps about half a million more barrels a day than its target of
30 million barrels a day, according to the International Energy Agency.
Members are considering a commitment to rein in production to the group’s
target level, OPEC delegates said, effectively cutting production sharply.
 
Together, OPEC member countries still produce more than one-third of the
world’s oil supply. Since 1984, the cartel has reduced output 11 times to
address oil price falls, according to Deutsche Bank, with cuts totaling 1.24
million barrels a day, on average.
 
Each time, Brent crude prices, the international benchmark, rose in the two to
three months following OPEC action, Deutsche found.
 
A collective move to cut output could boost prices, but it would also rob OPEC
members of revenue. It is unclear how long such vulnerable OPEC economies as
Venezuela and Nigeria could afford to limit production without reopening the
spigots.
 
Unlike past meetings, this month’s gathering poses an added dilemma. By
keeping oil prices high, the group would encourage oil investments, including
U.S. shale production. The U.S. has flooded markets with new crude,
contributing to lower prices, but its shale production requires relatively
high oil prices to make money.
 
That is an incentive for OPEC to do nothing for now—if members can survive
the pain of lower prices in the short term.
 
Privately, Saudi Arabia doubts the 11 other OPEC members would live up to a
collective commitment to cut output, according to Saudi officials and Saudi
oil-industry executives. And Riyadh isn’t willing to bear the pain of a
unilateral cut, these officials and executives said, fearful of losing
customers amid the current squabbling.
 
The uncompromising Saudi stance stems from the 1980s, when Saudi Arabia cut
production sharply to bolster oil prices as substantial new oil supply emerged
from the North Sea and the U.K.
 
Instead of standing by Riyadh, other OPEC producers kept pumping and tried to
wrest away market share.
 
“Saudi Arabia has definitely made it clear that defending the oil market is
a collective responsibility, and no member country should expect Saudi Arabia
to swing alone,” said Mr. Sabban, the former aide to Mr. Naimi. “If there
is no agreement on this very basic principle, then Saudi Arabia will continue
defending its market share.”
 
Saudi Arabia, with its large cash reserves, is cushioned from short-term price
weakness. Still, the kingdom needs Brent to average $99 a barrel to balance
its budget this fiscal year, Deutsche Bank estimates. It is currently trading
just under $80 a barrel, a four-year low.
 
While oil-market dynamics are complex, two broad issues underlie the
commodity’s recent fall. The IEA estimates the U.S. is adding roughly one
million barrels of oil a day each year to global supply, thanks to shale oil.
The return of an unexpectedly large amount of supply from such strife-ridden
countries as Libya and Iraq has added to the glut.
 
Meanwhile, growth in global oil demand has slowed, particularly in Asia. In
March, the IEA expected annual oil consumption to grow by 1.35 million barrels
of oil a day in 2014. Its estimate has since nearly halved, with the paring of
forecasts for global growth.
 
Repercussions of the OPEC debate go well beyond the borders of its members.
Lower oil prices are slamming Russia, for example, which is already squeezed
by Western sanctions and a tumbling currency.
 
U.S. consumers are benefiting from lower prices at the pump. But lower prices
also shrink cash flow at many U.S. oil companies, particularly those engaged
in relatively expensive shale-oil production.
 
If weaker prices force some producers—particularly U.S. shale producers—to
abandon their most expensive wells, then the market could eventually work in
OPEC’s favor.
 
In early October, Saudi officials led by Nasser al-Dossary, Saudi Arabia’s
national representative to OPEC, attended a seminar in New York organized by
an energy consultancy. Mr. Dossary privately communicated to attendees that
Riyadh wasn’t alarmed by the price slide and wouldn’t unilaterally cut its
output, according to people familiar with the matter.
 
Attendees interpreted the remarks as a signal Saudi Arabia would try to
undermine North American shale-oil production by allowing prices to slip to a
point where some shale projects would be uneconomic.
 
And some analysts took a move earlier this month by Saudi Arabia to drop its
crude prices in U.S. markets as a sign it was trying to undercut shale
producers.
 
A person familiar with the Saudi visit to New York said analysts
misinterpreted Mr. Dossary’s message and that Riyadh wasn’t targeting
shale producers. Attempts to reach Mr. Dossary or the Saudi oil ministry media
office were unsuccessful.
 
Industry officials familiar with the Saudi price cut said it was aimed only at
protecting market share among U.S. refiners.
 
—Sarah Kent contributed to this article.
 
Write to Summer Said at summer.said@wsj.com and Andrew Peaple at
andrew.peaple@wsj.com

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