News ID: 112449
Published: 0418 GMT February 24, 2015
Members of OPEC have discussed holding an emergency meeting if crude continues to slide, according to Nigeria’s oil minister, in a sign of their growing alarm over the impact of a lower oil price on their economies.
The comments by Diezani Alison-Madueke come three months after the organization’s decision to hold production at 30 million barrels a day, even as the oil price has plunged since mid-June, FT reported.
That move, driven by Saudi Arabia and its Persian Gulf allies, marked a sharp deviation from the Organization of Petroleum Exporting Countries’ traditional strategy of adjusting production to keep prices high. The group’s main objective is now to defend market share, despite dramatically reduced revenues.
The price plunge has forced energy companies all over the world to rewrite their investment plans and caused a major slowdown in the US shale oil industry. But it has also thrown the fiscal balances of big oil producers such as Nigeria, Venezuela and Russia into disarray.
“Almost all OPEC countries, except perhaps the Arab bloc, are very uncomfortable,” said Alison-Madueke, who as president of OPEC is responsible for liaising with member countries and the producer group’s secretary-general in the event of an emergency meeting.
If the price “slips any further, it is highly likely that I will have to call an extraordinary meeting of OPEC in the next six weeks or so”, she said in an interview with the Financial Times. “We’re already talking with member countries.”
But market analysts say it is highly unlikely that Saudi Arabia, OPEC’s de facto leader, will agree to such a meeting.
After hitting a high of $115 a barrel in June, the price of internationally traded Brent crude oil has dropped rapidly and almost hit $45 a barrel last month — a near six-year low.
Although the price has since recovered to around $60, Alison-Madueke said she was not convinced a floor had been reached.
“It is hoped that the price will stabilize at no less than $60, but we cannot be sure,” she said.
Alison-Madueke said OPEC’s role needed to be reconfigured over the next two years “if we are to remain strongly relevant”, by formalizing discussions with other key oil producers such as Russia and the US, as well as global groups like the International Energy Agency and the G20.
“It cannot only be OPEC that is responsible for stability in the market,” she said. “The world has moved on from the days that OPEC was the be all and end all.”
OPEC is scheduled to meet next in June, although in times of market turmoil the group often convenes emergency meetings. But all 12 members have to agree to such a move.
Alison-Madueke said members were “very cognizant of the Saudi position”.
The slide in the oil price has plunged Nigeria’s economy into turmoil, while the government’s decision to postpone national elections by six weeks to March 28 on security grounds has only deepened the sense of uncertainty.
The country, which is Africa’s largest producer, depends on oil typically for about 80 percent of government revenues.