Iraq Says OPEC Will Need To Step In If Oil Prices Keep Falling

The Organization of Petroleum Exporting Countries will have to “step in” if oil prices keep falling amid oversupply, Iraq’s Oil Minister Adel Abdul Mahdi said.

OPEC decided on Nov. 27 to maintain its output at 30 million barrels a day to defend market share amid a glut that helped send oil prices to the lowest levels since 2009. Prices have dropped about 20 per cent since the meeting with the oversupply estimated by Qatar at two million barrels a day.

“If prices keep falling to very low levels where the whole equation is not balanced, then definitely OPEC has to step in,” Abdul Mahdi said in an interview in Abu Dhabi yesterday. He didn’t say if that means cutting production.

The group’s decision was taken after Saudi Arabia’s Oil Minister Ali al-Naimi said OPEC must protect its market share and let prices fall to trim output outside OPEC, Abdul Mahdi said.

“We accepted the Saudi theory to correct the situation in the market as it made sense to all of us,” he said.

The “fair price” of oil that was $100 to $105 a barrel is now closer to $70 to $80 a barrel, Abdul Mahdi said. Iraq’s cabinet yesterday approved a budget based on $60 oil.

Global crude prices dropped about 45 per cent this year, heading for the biggest annual decline since 2008. Today’s price of $61.39 a barrel compares with $147.50 in July 2008.

Saudi Arabia, the group’s biggest producer, doesn’t plan to pump less “whatever the price is,” Al-Naimi told the Middle East Economic Survey in report published Dec. 22.

“We will fight for now as we have built financial reserves to help us stand longer,” Abdul Mahdi said. “We will surely not fight for a very long time but we can fight for a period of time.” When asked if OPEC can hold back from intervening in the market for one or two years, he said: “Yes.”