Gulf to reject OPEC cuts to guard oil market share

Gulf oil producers led by Saudi Arabia will likely reject output cuts at an OPEC meeting next week unless they are guaranteed their market share in a highly competitive market, analysts say.
The stance of Kuwait, Qatar, United Arab Emirates and Saudi Arabia is seen as crucial for a positive OPEC decision on reducing supplies to boost crude prices, which have shed a third of their value since June.
The four pump a total 16.2 million barrels per day, or 52 percent of the 12-member Organisation of Petroleum Exporting Countries, but they account for two-thirds of the cartel's exports, according to figures from OPEC and other agencies.
"OPEC members are looking at Saudi Arabia, Kuwait and UAE to shoulder the bulk of any production cuts, and they can," said Kuwaiti oil expert Kamel al-Harami.
"But it is extremely unlikely for Gulf states to accept output cuts unless other OPEC members take the initiative... They need assurances other OPEC or non-OPEC producers won't fill the gap," said the former oil executive.
"It is not in the interest of the Gulf states to cut output because they risk losing highly valuable market share," he told AFP.
Oil prices have crashed to four-year lows on dampening demand from a combination of factors including a sluggish world economy, a sharp rise in output from unconventional sources like shale oil, and a strong dollar.
This has resulted in slumping revenues for most OPEC and non-OPEC producers heavily reliant on oil for their budgets.
Venezuela has called for a meeting of both OPEC and non-OPEC countries to address the price slide, joining hands with Ecuador to urge the cartel to cut output.
- 'Fears over non-OPEC moves' -
"The fear of non-OPEC producers boosting output will make most OPEC members very cautious in accepting cuts," said Khaled Bodai, head of the Horizon for Administrative Consultations.
"I am not optimistic there will be an agreement for cuts," Bodai, a former member of Kuwait's Supreme Petroleum Council, told AFP.
Kuwaiti Oil Minister Ali al-Omair said last week an OPEC decision to cut output "will be very difficult".
Saudi Arabia, the world's top crude exporter, has not commented on possible output cuts but in early November it sent oil prices tumbling when it eased its crude price for the United States to preserve market share.
"The focus at the moment is on Saudi Arabia and whether it will succumb to pressure from within the OPEC cartel and outside to cut production," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
Saudi economist Abdulwahab Abu-Dahesh said Gulf states would "fiercely resist pressure to cut output.
"The battle now is for market share, and if they cut output, they lose market share," he told AFP.
Markets for crude oil and petroleum products have tightened due to ample supplies and waning demand.
Saudi Arabia exports two-thirds of its crude to Asia, less than 20 percent to the US and just 10 percent to Europe, according to the US Energy Information Administration (EIA).
Kuwait sends 75 percent of exports to Asia, while UAE and Qatar export almost all their crude to Asia.
- US shale hitting exports -
Oil production in the United States, the world's top energy consumer, surpassed 8.5 million bpd this year thanks to rising shale output.
Consequently, its net imports dropped by 1.2 million bpd to about 5.2 million bpd, OPEC figures show.
Saudi exports to the US dropped from 1.25 million bpd in July to under 900,000 bpd in August, but it remains the second largest US supplier after Canada, according to the EIA.
With Gulf exports to Europe very small and decreasing, the only markets left for crude are Asia and the Pacific.
"The interests of the Gulf states is better served by fighting the battle for market share and refusing the cuts. This will push prices down, but will force high-cost producers out," Abu-Dahesh said.
Mohammed Suroor al-Sabban, a former adviser to the Saudi oil minister, has said he expects OPEC to stick with its current output ceiling.
OPEC, which is to meet in Vienna on November 27, pumps about a third of global crude and currently produces just under 31 million bpd, about one million more than its target.
The analysts agreed a cut of 1.0-1.5 million bpd could halt the price slide but may not be enough for a strong rebound.
"If Gulf states have to choose between a high price for oil or preserving their market share, they will certainly opt for the latter," said Abu-Dahesh.
"They have huge fiscal reserves to survive low oil prices for two to three years."