OPEC gave the strongest signal yet that it is happy with today's lower oil prices, as its secretary general told an oil conference its production is unlikely to change much in 2015.
There is no need to panic at the crude price drop, Abdullah al-Badri said at the Oil & Money conference in London.
“If prices stay at $85 [for Brent crude], we will see a lot of investment, a lot of oil, going out of the market,” Badri said. “About 65 per cent of the producers, they have high costs. Not OPEC.”
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His statement indicates the oil cartel is content to let oil prices stay at the $80 US a barrel range, as that would hurt U.S. shale producers, and Canadian oilsands producers, much more than OPEC.
West Texas Intermediate crude was trading at $82.49 a barrel in New York on Wednesday morning, down $20 from its peak in July.
OPEC to meet in November
OPEC meets Nov. 27 and it will be up to its members to decide whether to cut production, currently at a target of 30 million barrels per day.
The gush of North American shale oil has been blamed for a glut in the world supply of oil, which has met a dip in demand because of a global economic slowdown. That has driven oil prices lower over the last month.
But Badri said he believes OPEC needs to prepare long term for increased demand.
“We do not see much change in the fundamentals. Demand is still growing, supply is also growing. OPEC is reviewing the situation,” he said.
“The most important thing is we should not panic,” he said. “Unfortunately, everybody is panicking. We really need to sit, and think and see how this will develop.”
On Monday, Goldman Sachs predicted oil could fall to $70 a barrel, sending a shiver through the markets.
Ottawa watching oil
The falling price of oil has potential to disrupt Canada’s economy, as both the Alberta and federal governments rely on oil revenue.
On Tuesday, Canada's junior finance minister Kevin Sorenson said the Harper government is watching closely to see what if any effect falling oil prices will have on finances as it prepares a fall economic statement.
Sorenson said the government still believes the federal budget will be balanced next year, even as lower oil prices reduce revenue.
But today, Bank of America, Commerzbank AG and BNP Paribas predicted crude had hit a floor at $80 a barrel. However, that may change if OPEC rejects production cuts next month, said Eugen Weinberg, head of commodities research for Commerzbank in Frankfurt.
Statoil takes loss on Canadian project
Some of the world’s biggest oil companies pointed to declining earnings as a result of the falling oil prices.
France’s Total SA and the U.K.’s BP Plc and BG reported a decline in earnings this week.
On Wednesday, Norway’s Statoil ASA reported its first quarterly loss since listing in 2001 after writing down the Corner oilsands project in Alberta.
It reported losses of $790 million, writing down $1.3 billion after cancelling the Canadian oilsands project.