The Organization of Petroleum Exporting Countries will hold informal talks at a conference in Algiers next month and considers the recent decline in oil prices “temporary,” the group’s president said Monday.
“Expectation of higher crude oil demand in the third and fourth quarters of 2016, coupled with decrease in availability, is leading the analysts to conclude that the current bear market is only temporary and oil price would increase during later part of 2016,” Mohammed Al Sada, Qatar’s energy minister and holder of OPEC’s rotating presidency, said in a statement on the group’s website. Members constantly discuss ways to stabilize the market, he said.
Oil tumbled into a bear market last week, ending a recovery that saw prices almost double from a 12-year low in February. The renewed decline keeps pressure on many member countries that are still unable to balance their budgets. OPEC ministers last met in June when they rejected a proposal to adopt a new output ceiling, sticking to a policy of unfettered production.
Al Sada’s comments indicate the group is concerned by the drop in prices and may consider action if the market doesn’t stabilize at a higher level, according to Robin Mills, chief executive officer of consultancy Qamaar Energy.
“If they’re going to talk about anything that’s worth announcing to the market, it would have to be an idea like the previously proposed freeze in oil production,” Mills said by phone from Dubai. “I don’t hold much credence in that coming about, but they could be in a better condition to agree on a freeze by the end of the year than they have been.”
West Texas Intermediate oil rose 1.3 percent to $42.34 a barrel at 1:27 p.m. in Dubai after falling 14 percent in July.
Russia sees no need for renewing discussion of an oil-output freeze at current crude prices, while leaving open the possibility for the future, Energy Minister Alexander Novak told journalists in Moscow Monday. Novak didn’t rule out speaking with his counterparts from OPEC member states when he attends the meeting of the International Energy Forum in Algiers being held Sept. 26-28.
Russia, Saudi Arabia and other major oil exporters met in Doha in April in a bid to stabilize global markets by putting caps on output. The effort collapsed after Saudi Arabia demanded that rival Iran be a part of the agreement. At the time, Iran had ruled out any limits on its output as it ramped up production after the lifting of international sanctions.
Iran will probably raise production back to pre-sanctions levels by the end of the year, while Saudi Arabia will also be selling more crude as domestic use of fuel during the country’s summer months slows, Mills said. Iran is pumping about 3.8 million barrels of crude a day and exporting about 2 million of that, Mohsen Ghamsari, director of international affairs at National Iranian Oil Co., said in an interview in Tehran last month. That’s allowed it to get back to about 80 percent of the market share it had before the restrictions, he said.
The latest drop in prices won’t last, Al Sada said. The recent slide in prices reflects weaker refining margins, a surplus of refined products, plus the U.K.’s vote to leave the European Union and its impact on the financial markets, according to the statement attributed to Al Sada.
Members of OPEC have no specific plans to renew the failed April agreement with non-members to freeze oil production, two delegates from the group said Friday, asking not to be identified because the information isn’t public. OPEC partners intend to discuss the oil market and potential cooperation with other producers when they gather in Algiers, they said.