RIYADH: OPEC’s biggest crude producer Saudi Arabia will have its sights set on the upstart US shale oil business at a crucial cartel meeting to debate possible output cuts on Thursday.
Analysts say the kingdom is content to see shale oil producers — and even some members of the cartel — suffer from low prices and will resist pressure to reduce output and shore up the cost of oil.
A barrel of crude has plunged by about one third in value since June to around $80 in an increasingly competitive market.
Saudi Oil Minister Ali al-Naimi was silent about his government’s intentions Monday as he arrived in Vienna ahead of the OPEC gathering.
“Is this the first time we have oversupply?” he was quoted as saying by Dow Jones Newswires when questioned about current supply and demand.
Analysts say the kingdom is strong enough to withstand lower prices.
“Saudi Arabia wants to try and knock out shale oil competitors from the market,” said Saudi economist Abdulwahab Abu-Dahesh.
“They have the fiscal strength to remain steadfast for two to three years,” he told AFP.
Oil prices have collapsed to four-year lows on factors including dampening demand in a sluggish world economy, a sharp rise in output from shale oil and other unconventional sources, and a strong dollar.
Global oil prices fell Monday amid skepticism that OPEC would move aggressively to lift prices.
US benchmark West Texas Intermediate crude for January delivery dipped 73 cents to $75.78 a barrel on the New York Mercantile Exchange.
Meanwhile European Brent oil for January dropped 68 cents to $79.68 a barrel in London.
Although Saudi Arabia and its Gulf neighbours the United Arab Emirates and Kuwait could bear the burden of lower production, “I don’t think they will cut because they will lose their market share,” said Fahad Alturki, chief economist and head of research at Jadwa Investment in the Saudi capital.