The oil market is slowly recovering from its steep drop over the past two years but crude is still not trading at a “fair price” to encourage necessary investment, Qatar’s energy and industry minister said Tuesday, ahead of next week’s meeting of OPEC producers.
Speaking to The Associated Press from his high-rise office in the capital, Doha, Mohammed bin Saleh al-Sada said a minimum price of $65 a barrel is “badly needed at the moment.” He cautioned that the security of future supplies is as risk because of the price slump that has squeezed oil producers since 2014.
“The oil market is recovering slowly but steadily. Luckily, the fundamentals show it is heading in the right direction,” al-Sada said. “I don’t think we are yet at a fair price. We need to have a fairer price so that we can have the ability to invest more in order to secure the energy supply to the world and avoid any price shock.”
In the interview, al-Sada did not rule out reviving talks of a freeze in production among major producers after similar negotiations collapsed in Doha last month. He currently serves as president of the 13-memeber OPEC.
“Nothing actually is canceled but we are reacting to the parameters of the market,” he said. “If OPEC and non-OPEC major producers think that the revival of it is necessary, it’s all open and on the table all the time.”
The idea for a production freeze grew out of meeting between Russia and OPEC members Saudi Arabia, Venezuela and Qatar in February as they attempted to stem a slide that at the time had pushed prices to around $30 a barrel from over $100 in the summer of 2014.
Other major producers gathered in Qatar to discuss the proposal last month but failed to agree on a cap after Iran, which wants to boost exports after years of sanctions, refused to join in.
Al-Sada was careful not to blame Iran for the collapse of the freeze plan, saying the April meeting was nonetheless productive because it gave producers a chance to discuss “new market fundamentals.”
Even without an output freeze, prices have been clawing their way back, settling Monday above $48 a barrel. That’s still less than half their level less than two years ago.
Qatar and other OPEC member states will gather in Vienna next week to discuss what to do next, though industry observers are not expecting a major shift in policy. It will be the first such gathering where kingpin Saudi Arabia is represented by Khaled al-Falih, who was recently named energy minister in a surprise Cabinet shakeup.
Venezuela has suggested that non-OPEC producers might also take part in the June meeting. Al-Sada did not rule that out.
“We are in the consultation about it, whether it is appropriate to have it in the meeting, parallel to the meeting, or after the meeting,” he said.
Saudi Arabia and other influential OPEC members responded to the drop since 2014 not by cutting back supply, which they’ve done before to try to prop up prices, but by keeping output high in an attempt to hold onto market share. The aim is to force higher-cost oil producers, particularly U.S. shale drillers, out of the market.
The plunge is straining the budgets of countries that depend heavily on oil. Venezuela is being gripped by a full-blown economic crisis, and even wealthy Gulf states — including Qatar — are cutting back spending and laying off workers.
Al-Sada insisted Qatar’s economy remains healthy even at current oil prices and that major infrastructure projects are on track. That includes preparations for the 2022 World Cup, which will require billions of dollars’ worth of additional stadiums, transport links and hotels — some of which are now being raised just outside al-Sada’s office — to be built over the next eight years.
“Everything is on schedule,” he said.
Qatar is able to manage some of the volatility of the energy markets better than other producers because it is also the world’s largest supplier of liquefied natural gas, much of which is sold in long-term contracts and shipped aboard the Gulf nation’s own massive tankers.
But competition is coming. Australia is on track to overtake Qatar within the next two years, and it has the advantage of being closer to major Asian customers such as Japan and South Korea. U.S. production is increasing too.
State-run Qatar Petroleum has a 70 percent stake in an existing LNG receiving terminal in Texas that is also backed by ExxonMobil Corp. and ConocoPhillips Co. That joint venture, Golden Pass, is seeking U.S. government approval to expand the facility so it can export 15.6 million tons of LNG per year.
Al-Sada says the LNG competition is manageable, particularly because of Qatar’s relatively low production costs.
“We are enjoying first-mover advantage,” he said. “We know that it is just impossible that we remain alone in the market.”