Oil producers outside of the Organization of Petroleum Exporting Countries (Opec) should cut their “irresponsible” output with excess supplies harming the market, the United Arab Emirates (UAE) energy minister said.
The oil market is oversupplied by 2 million barrels per day (bpd), Mohammed Al Sada, Qatar’s energy minister, told Bloomberg at a conference in Abu Dhabi. Opec has produced about 30 million bpd since January 2013, while global output climbed more than 2 million bpd to 93.6 million barrels, according to data compiled by Bloomberg.
“We call on all other producers to stop the increase, because the increase is harming the market,” UAE Energy Minister Suhail Al Mazrouei told Bloomberg at the conference. “If the increase stops, and they follow Opec’s lead, Opec’s decision is to fix production; if production stabilizes in 2015, things will stabilize much faster.”
Brent oil prices tumbled 45 percent this year. The Opec decided last month to keep production unchanged at 30 million barrels, resisting calls from cash-strapped Venezuela that the group needs to stem the rout in prices.
“Irresponsible production from outside Opec is behind the fall in prices,” Mazrouei said in a speech at the conference. “The market will improve over time.”
Output in the US is the highest in three decades, and production is poised to approach a 42-year high next year, as declining equipment costs and enhanced drilling techniques more than offset the drop in oil markets, according to Troy Eckard, whose Eckard Global Llc. owns stakes in more than 260 North Dakota shale wells. Oil extraction is soaring at shale formations in Texas and North Dakota, as companies split rocks using high-pressure liquid, a process known as hydraulic fracturing or fracking.
The estimate of oversupply of 2 million barrels is more than the 540,000-barrel surplus signaled from International Energy Agency (IEA) figures as of September 30. Global production was 93.6 million barrels a day, compared with a demand of 93.06 million barrels, IEA figures show. Global output was 90.54 million barrels a day early in 2013.
“We are now in a provisional, correctional period,” Al Sada said. “Markets have stabilization mechanisms that will bring stability. We don’t know exactly how long it will take but it will stabilize because the current prices will separate the efficient producers from the producers who have high costs.”