OPEC is likely to stick to its no-cut oil output policy when it meets in December if major producers from outside the group are not willing to help in reducing supplies, a senior Gulf OPEC delegate said on Thursday.
Oil prices are under pressure as crude and refined products inventories are higher than the five-year average, but that is likely to improve next year, the Gulf delegate told Reuters.
Demand for crude is healthy and it expected to remain strong next year despite concern over China‘s economy, the delegate said.
“It is a difficult situation for OPEC to cut alone then others increase their production,” the delegate said. “If non-OPEC did not cooperate, OPEC is likely to keep its policy unchanged.”
Saudi Arabia led a shift by the Organization of the Petroleum Exporting Countries in November 2014 to defend market share against competing supplies, rather than cut output to prop up prices.
Some OPEC members are trying to bring major non-OPEC producers, such as Russia, on board to cut, but so far efforts have not succeeded in convincing Moscow and others to work with OPEC.
It is also hard for OPEC to reverse its policy shift, championed by Saudi Arabia, the world’s top oil exporter, particularly at a time when both Iran and Iraq are gearing up to boost their exports.
The comments by the Gulf delegate suggested big policy changes are unlikely at the next OPEC meeting on Dec. 4 unless non-OPEC producers change their stance.
“Commercial stocks are higher than normal, for both crude and products. This is really what is keeping the prices from taking off,” the delegate said.
“The expectation now with oil production from many areas such as in the United States and North Sea will go down, stocks will start going down by early next year,” he said.
“When you start seeing stocks going down, you will start seeing prices going up,” the delegate added.
Oil LCOc1 is trading below $50 a barrel, less than half its level of June 2014.
The International Energy Agency has forecast that oil demand growth would slow next year and a potential increase in exports from Iran would counter slowing output from the United States and other countries outside OPEC, keeping the market over supplied.
Chinese growth for the third quarter is expected to fall below 7 percent for the first time since the global financial crisis.
But the Gulf delegate said that GDP should not be the only measure for crude demand, but other factors should be considered such as employment and income increases.
“Demand in China is not changing because of slower economic growth,” the delegate said, adding that oil demand in the United States may continue to grow next year.
Riyadh says the strategy is working and OPEC officials point to stronger growth in world oil demand since the policy shift and to slower growth in non-OPEC supply. Crude exports from Saudi are on the rise from a 2014 low.
