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Opec powerless to halt oil price slide, warns former group president

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Opec veteran says that current oil prices slump has exceeded the worst expectations of the group

By Andrew Critchlow, Commodities editor: 24 Aug 2015

Opec is powerless to arrest the slide in oil prices unless producers outside the group such as Russia match any cuts in output, according to a former president of the group.

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With oil prices plummeting due to global oversupply, the Organisation of the Petroleum Exporting Countries (Opec) would be unable to stabilise the market on its own, Abdullah bin Hamad Al-Attiyah told The Telegraph on Monday. The group – which is mainly comprised of Middle Eastern and South American oil producers – would need agreement from other oil-producing nations.

“I don’t see any light at the end of the tunnel,” said Mr al-Attiyah. “Opec and non-Opec need to agree to support the market.”

Brent crude is down 57pc over the last year to $43 per barrel with pressure mounting within Opec for an emergency meeting of oil ministers to discuss the price slide. Iran’s oil minister Bijan Zanganeh said over the weekend that Tehran would support a meeting to address falling prices.

Mr al-Attiyah, previously one of Opec’s longest serving ministers and the group’s ex-president, is currently is advising governments on energy policy.

“The market is very oversupplied but the problem is that everyone now is increasing production,” said Mr al-Attiyah.

Tension is building within Opec between Saudi Arabia – the group’s largest producer – and smaller members who are being crippled by the collapse in oil prices. The Telegraph reported last week that the Opec secretary general had spoken to Saudi Arabia on behalf of members who are increasingly “fed up” with the current strategy.

The kingdom was the main catalyst behind Opec’s decision last November to maintain production levels despite the collapse in prices when some members were calling for steep cuts.

The strategy effectively triggered a price war with shale drillers in the US and Russia. However, both rival producers have increased production in response to the lower prices, suggesting that Opec’s strategy has failed.

Mr al-Attiyah, who was also Qatar’s oil minister, said that the current oil price decline has “exceeded our worst expectations”.

Saudi Arabia has increased its share of the market, now pumping over 10.6m barrels per day (bpd) of crude despite Opec setting a production target ceiling at 30m bpd. The kingdom would have to agree to make the biggest cuts if any collective action by Opec were to succeed to lift prices.

“It’s not Saudi’s responsibility to support the oil market,” said Mr al-Attiyah.

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