A general view of the Opec building and logo in Vienna.
VIENNA: Opec oil exporters, set to leave output policy unchanged, were weighing the impact of rising supplies of US shale oil that are redrawing the landscape of global oil trade.
The Organisation of the Petroleum Exporting Countries has little room to pump more oil due to the US oil boom that has sparked competition for marketshare in Asia and set off a rivalry between its top two producers Saudi Arabia and Iraq.
At a meeting in Vienna today, the 12-member group is expected to stick with its 30 million barrel a day (b/d) output target for the last six months of 2013.
“Everything will be as before, we will maintain the production level,” said Libya’s Oil Minister Abdelbari Al Arusi.
A year ago, Opec gave shale oil short shrift, but now it is a hot topic. Gulf producers are of the view that Opec will still be able to pump at least 30m b/d, provided US shale grows at a moderate pace.
“Shale oil is not a threat, but it changes the dynamics of where the oil is going. There will be more competition in Asia,” said a Gulf Opec source. Despite the growing supply, oil is comfortably above $100 a barrel, well below the $125 that rang alarms in major consumer countries last year.
But triple digit oil has also unlocked vast amounts of US shale oil in North Dakota and Texas — which competes with Opec crude of similar, light quality from Nigeria and Algeria, rather than heavier Saudi output.
Nigeria, along with Algeria, has already felt the heat from the US oil boom, losing ground in its most lucrative export market and diverting sales to Asia.
Fast-growing exporter Iraq is also fighting for more Asian market share, competing with regional rival Saudi Arabia. “We are looking to increase our exports and we aim to make our crude more competitive in the market,” Iraq’s Oil Minister Abdul Kareem Luaibi told reporters in Vienna.
The United Arab Emirates, also building up capacity, has the region in its sights, but downplayed the prospect for battle. “I’m not of the view that competition in Asia is going to distort the price,” UAE Oil Minister Suhail bin Mohammed Al Mazroui said.
Innovative use of hydraulic fracturing, or “fracking,” has put the United States in line to become the world’s largest oil producer by 2017, overtaking Saudi Arabia. That is not worrisome for Riyadh, especially when it comes to charting policy for the second half of 2013.
And the kingdom shows no sign of opening the taps to bring down prices and curtail that output by making it uneconomic. By the end of last year, the United States had recorded the biggest annual rise in oil output since it first pumped oil in the early 1860s. The 850,000 b/d increment was more than each of Opec’s two smallest producers, Qatar and Ecuador, pump in total.
Surging non-Opec production has not prompted so much debate in the cartel in more than a decade, but there is no common view. While Saudi Oil Minister Ali bin Ibrahim Al Nuaimi welcomes it, his Nigerian counterpart Diezani Alison-Madueke has said it will have a “major impact.” Others within Opec, including price-hawk Iran, are concerned about the potential for both slow global growth and a dramatic rise in US shale oil to send prices tumbling.
Reuters
