OPEC Ministers: Falling Demand Is Our Top Concern
It is a slowdown in demand – not a U.S. shale oil revolution – that poses the biggest threat to OPEC, ministers told CNBC on Friday.
Venezuela's Oil Minister Rafael Ramirez said that given the global economic downturn, a drop-off in demand was the biggest concern for the Organization of Petroleum Exporting Countries (OPEC).
"What we are concerned about is the demand side. The economic crisis in the European Union and the U.S. puts demand in some danger," Ramirez told CNBC. "We have a greater preoccupation with demand, than non-conventional oil."
OPEC's oil exporters agreed to retain their output target of 30 million barrels per day at the organization's conference in Vienna, as the price of Brent crude oil remains stable at around $100 a barrel.
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Ali al-Naimi, Saudi Arabia's oil minister, told CNBC he had no worries about OPEC's output.
"I'm not concerned about anything," al-Naimi told CNBC. "Let me give you advice: take out the word 'worry', take out the word 'concern' and the world will be in good shape." Saudi Arabia is OPEC's largest producer of oil, and is estimated to have produced 9.3 million barrels per day in April, down from a peak of 10.1 million last year.
Analysts disagree about the outlook for global oil demand, because the U.S. economy appears to be picking up, while economic growth remains elusive in Europe and is slowing in China. However, OPEC forecast an uptick in Chinese consumption of oil earlier this month, and upped its overall demand outlook for 2013 by 90,000 barrels a day.
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Jason Schenker, president and chief economist of Prestige Economics, said demand would remain strong, and could even push the price of oil higher.
"Last year was a horrible year for China, and yet you still saw oil demand grow," Schenker told CNBC.
"This year is a pretty tepid year for global growth… but what happens if you have a good growth year? We're looking right now at the $100-$110 per barrel range – what happens when Europe actually grows? What happens when China actually sees positive growth?"
He added that OPEC should not be concerned about U.S. production of shale oil in the short-term.
"Over time, if shale develops - especially in other regions [of the world]– that becomes a concern," he said. "But the truth is, global demand, rising demand in emerging markets, is going to be very, very strong. We're going to need every barrel."
Nigeria's Oil Minister, Diezani Alison-Madueke, agreed that a shale gas boom would not affect OPEC production levels in the near future, but said it remained a threat to Africa, in particular in the medium- to long-term.
"It is incredibly important, I think for the balance of both supply and global security, that we remember that Africa does need to have its exports continuously going out," Alison-Madueke told CNBC.
"I don't think, in the very immediate short-term, the shale oil or shale gas will overtly affect OPEC's production and exports at all, but it is of grave concern for us. Even though we do respect the integrity of the U.S. to be self-sustainable in terms of oil and gas, we are of course concerned in the medium-term."
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- By CNBC's Katrina Bishop, follow her on Twitter @KatrinaBishop