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23 Nov, 2015 10:40

Venezuela warns OPEC of oil price drop to mid-$20s

Venezuela warns OPEC of oil price drop to mid-$20s

Oil prices could plunge to the lows of mid-$20s a barrel next year if OPEC doesn’t change its policy to stabilize the market, said Venezuelan Oil Minister Eulogio Del Pino.

"OPEC has to do something very soon ... We don't agree with the position that says the market, some way, is going to dictate the price of crude oil. We don't agree with that position of Saudi Arabia," the minister said on the sidelines of the Gas Exporting Countries Forum (GECF) summit in Tehran.

He also told reporters that Venezuela is urging the cartel to adopt an ‘equilibrium price’ which covers the cost of new investment in production capacity. The country sees the `equilibrium price' at $88 a barrel, according to Del Pino, who added that Saudi Arabia and Qatar are to consider the proposal.

“We cannot allow that the market continue controlling the price,” he said. “The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC.”

According to Del Pino, low oil prices would affect future oil investment. That could mean not meeting future demand growth for oil and could lead to a spike in prices later.

"And ‎we don't want that kind of cycle of low price and high price, it is not good for consumers or producers. We need to send to the market a signal of stabilization, and that signal of stabilization is not what we are doing now.... We are destroying the price of crude oil. The speculative market is the one that is controlling the market," Del Pino said.

OPEC ministers are planning to meet on December 4 to determine the cartel’s output policy. The group of 12 OPEC countries supplies about 40 percent of the world’s production. In July its output hit a three-year high, when the cartel pumped 31.5 million barrels per day (bpd).

Despite the perpetual appeals to reduce output and support crude prices, OPEC has been refusing to do so as the organization is trying to maintain its market share.

Oil prices have almost halved in the last 12 months as a result of a global supply glut.

Brent futures for January were trading 93 cents lower on Monday, at $43.73 per barrel. The price for West Texas Intermediate was down one dollar 25 cents at $40.65 per barrel at 11:00am GMT.