Algeria Calls for Non-OPEC Output Cut to Stop Oil Price Fall

Algeria Calls for Non-OPEC Output Cut to Stop Oil Price Fall
OPEC can do little to halt the oil price decline on its own and needs producers from outside the group to help in reducing global supplies, Algeria's Energy Minister says.

(Bloomberg) -- The Organization of Petroleum Exporting Countries can do little to halt the oil price decline on its own and needs producers from outside the group to help in reducing global supplies, Algeria’s Energy Minister said.

“A supply reduction by OPEC alone cannot really guarantee a return to oil market stability,” Salah Khebri said at an event in Algiers, according to Liberte newspaper. As the 12-member group of crude producing nations accounts for 40 percent of the world’s supply, “there should be steps taken within OPEC and with non-OPECs.”

Khebri called earlier this month for an OPEC emergency meeting because of the continued decline in oil prices, which dropped by half from a year ago amid rising production from the U.S. Oil and gas sales account for about 60 percent of Algeria’s budget revenue and 95 percent of its export income, according to the International Monetary Fund.

Algeria’s initiative to coordinate an OPEC response to tumbling crude prices had the backing of cash-strapped fellow members Libya and Venezuela. It was met with no public response from OPEC’s top producer Saudi Arabia, which engineered at the Nov. 27 meeting of the group a shift in its policy away from the historic role of managing prices by adjusting supply.

Saudi Arabia instead lobbied OPEC to preserve market share in the hope that prices would recover when higher cost producers such as U.S. shale companies are forced out of the market. The group stuck to the same policy at its last meeting in June.

Financial Muscle

Brent oil, the global benchmark grade, was 14 cents lower at $48.60 a barrel on the London-based ICE Futures Europe exchange at 12:44 p.m. Singapore time Tuesday.

“Algeria doesn’t have the financial muscle of Gulf Arab oil exporters,” Robin Mills, a Dubai-based analyst at Manaar Energy Consulting, said by e-mail. “Unlike Iran or Iraq, it doesn’t have the capacity to raise crude output; it’s a relatively small, high-cost and declining oil producer among its OPEC peers.”

Algeria’s financial cushion has been instrumental in shielding the country of 40 million away from strife that swept through the Middle East and North Africa since 2011, toppling the rulers of Yemen, Egypt and neighboring Libya.

“The country can increase its oil and gas output, and has renewable energy development projects, but that’s more of a medium-term perspective,” Francis Perrin, director of Paris- based energy consultants Stratener, said in an e-mail. “In the short term, Algeria’s only solution is to dip into the currency reserves.”

Algeria’s foreign reserves fell 18 percent to $158.4 billion in March, the last month when the figures are available on Bloomberg data, from a year earlier. With a population smaller than Algeria and oil production at 10.5 million barrels a day, Saudi Arabia’s reserves dropped 8 percent over the same period to about $667 billion.

To contact the reporter on this story: Maher Chmaytelli in Paris at mchmaytelli@bloomberg.net. To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net Dylan Griffiths.

Copyright 2016 Bloomberg News.

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Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Joseph Huber | Aug. 19, 2015
Opec is going to kill everyone outside of their area and then watch them cut output and the prices will rise again.

William Rubin | Aug. 19, 2015
Did I read that right? A supply reduction by OPEC alone cannot really guarantee a return to oil market stability, At what point has OPEC tried to reduce supply? Every week I see more headlines about record volumes coming from OPEC countries and every week I see stories about US production going down. OPEC keeps trying to change the narrative and shift focus to non-OPEC countries but the truth of the matter is that they have huge influence over markets. OPEC is stubbornly digging in their heels and will require a way to save face before any changes are made.


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