Despite pain, OPEC hawks come round to merits of riding out oil slump

LONDON (Reuters) – OPEC members which backed an output cut at the group’s meeting last month are coming around to the view of Saudi Arabia that they need to focus on market share, further reducing the chance of any action to defend prices.

While Venezuela – which campaigned for output cuts in the run-up to the Nov. 27 meeting – has continued to call for measures to prop up prices, other nations which usually back such action such as Iran and African members have been silent.

“The producers have not blinked. We are just watching and selling oil at whatever the price is,” said a delegate from an OPEC country which in November had wanted an output cut.

This means there is greater unity behind the view of OPEC’s core Gulf producers, which signalled this week they are prepared to wait as long as a year to see the market stabilise, despite a plunge in prices to below $60 a barrel, the lowest since 2009.

Oil’s fall from this year’s peak of $115 a barrel in June is particularly painful for countries such as Venezuela, Algeria and Iran, which need prices above $100 to balance their budgets, according to estimates by the IMF and other analysts.

OPEC was expected to address the problem in November by trimming production, but Gulf producers led by Saudi Arabia blocked calls from poorer members to reduce supplies, arguing the group needed to fight for market share.

A delegate from a second OPEC country which had backed a supply cut said any action to support prices would need to include non-OPEC Russia, which so far has shown no sign of backing down on its refusal to cut output.

“Despite the pain, we agree OPEC can’t cut alone,” the delegate said.

The first delegate said there was no need for OPEC to meet before its next scheduled gathering in June, as its most recent decision needed time to lead to a slowdown in competing supplies such as shale oil.

“The producers are trying to put the brakes on shale oil and that is going to happen sooner or later, and they are also stimulating the economy, and higher oil demand. That is going to continue.”