RIYADH: The $100 era is over and for good, pundits are conceding.

When asked by the Middle East Economic Survey (MEES), if oil markets would ever lift prices to $100 a barrel again, Saudi oil minister Ali al-Naimi responded “we may not.”

Not too long ago deemed a “fair” price by major producers, $100 a barrel crude apparently also helped bring a number of new, high cost resources online, generating to the detriment of the producers,” a glut-like scenario, many felt. And it was in this perspective that Opec officials have been hinting that their oft-repeated mantra of $100 a barrel crude as a “fair” price had been set aside, at least for the foreseeable future.

And producers are making things clear. While talking to MEES, without mincing words, minister Naimi reiterated, Opec will not cut production even if the price falls to $20 a barrel. “As a policy for Opec -- and I convinced Opec of this, even Mr al-Badri is now convinced -- it is not in the interest of producers to cut their production, whatever the price is.

“Whether it goes down to $20, $40, $50, $60, it is irrelevant,” he said.

And this was new, confirming in rather open terms that the traditional Opec strategy of keeping prices ‘fair’ by limiting oil output has been replaced with a new policy of defending the cartel’s market share -- and -- at all costs.

This represents a “fundamental change” in policy that is more far-reaching than any seen since the 1970s, Jamie Webster, oil analyst at IHS Energy was quoted as saying.

“We have entered a scary time for the oil market and for the next several years we are going to be dealing with a lot of volatility,” he said.

“Just about everything will be touched by this.”

And Mr Naimi was rather articulate in presenting his viewpoint, underlining if the kingdom (and the Opec) reduced output, “the price will go up and the Russians, the Brazilians, US shale oil producers will take my share.”

And he had a point to make. Efficient producers needed to be encouraged and not discouraged. “We want to tell the world that high efficiency producing countries are the ones that deserve market share,” he emphasised.

“Is it reasonable for a highly efficient producer to reduce output, while the producer of poor efficiency continues to produce?” Al-Naimi asked during the interview conducted with MEES.

Al-Naimi also added it was “unfair” for the world to expect Opec, with a market share of around 40 per cent, to reduce output. Others needed to be a part of the arrangement too, he underlined. “Let the most efficient producers produce.”

He also sought to rebut broader claims that Saudi Arabia has been using the oil price as a political tool. “The talk about conspiracy by Saudi Arabia for political motives is baseless and shows lack of understanding,” he said. “The [oil] policy of the kingdom is based on a strict economic basis.”

Speaking at the conference, Suhail bin Mohammed al-Mazroui, the UAE energy minister, said one of the principal reasons for the price fall was “the irresponsible production of some producers from outside the Opec.”

He added that non-Opec countries and high-cost production should play a role in balancing the market.

Qatar energy minister Mohammed Al Sada also hit out at rising rates of crude production outside Opec, saying the oil market is over-supplied by 2m barrels a day.

“We are now in a provisional, correctional period,” Mr Al Sada told Bloomberg. “Markets have mechanisms that will bring stability.”

The altered Opec policy seems challenging the high-cost crude -- from the oil sands of Canada and US shale to deepwater Brazil and the Arctic. The game is on!

Published in Dawn, December 28th, 2014