There is no need to panic at the recent drop in oil prices, the secretary general of OPEC said on Wednesday, saying low prices would curb competing supplies and require the group to pump far more by the end of the decade.
Abdullah al-Badri said output of higher-cost oil supplies such as shale would be curbed if oil remained at around $85 a barrel, while the Organization of the Petroleum Exporting Countries enjoys lower costs and will see higher demand for its crude in the longer term.
The comments are further indication that OPEC, which meets in November to set output policy, has no plan to cut supply in a bid to push prices back up. OPEC members have previously said they wanted oil at around $100 a barrel.
“If prices stay at $85, we will see a lot of investment, a lot of oil, going out of the market,” Badri said in London at the Oil & Money conference, an annual industry event. “About 65 percent of the producers, they have high costs. Not OPEC.”
Brent crude has dropped more than a quarter from above $115 per barrel in June as abundant supplies of high-quality oil such as U.S. shale have overwhelmed demand in many markets, filling stocks worldwide.
Badri did not say whether OPEC needed to cut oil production at its November 27 meeting in Vienna to support the market, and appealed for calm over the decline in prices.
“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.”
Badri declined to specify a level at which oil prices might find a floor, saying OPEC did not have a price target but would instead leave that to the market.
“OPEC's average price will still be $100 at the end of this year so we are fine for 2014,” he said. “The fundamentals do not reflect this low price.”
“OPEC does not have a price target. We must let the market settle down.”
Brent was trading around $87 by 1220 GMT after reaching a four-year low of $82.60 two weeks ago.
Badri said last month that he expected OPEC to lower its oil output target when it meets in Vienna, which would be its first formal output cut since the 2008 financial crisis.
OPEC has a production target of 30 million barrels per day (bpd) and Badri suggested last month that this should be cut to around 29.5 million bpd.
Since then, key OPEC members Iran and Kuwait have said a cut in output at the meeting was unlikely. Top producer Saudi Arabia has yet to comment publicly.
Badri reiterated that supplies from rival producers, such as shale oil, were not a threat to OPEC long-term and said OPEC had to be ready to pump far more in future.
“In the longer term, OPEC must be ready to produce. Around 2018-2020, U.S. tight oil will slow down,” he said. “By 2020, OPEC must be ready to produce 40 million bpd of oil, and 50 million bpd of liquids, that's crude and natural gas liquids.”