Saudi refuses to blink as crude plummets

The Organisation of the Petroleum Exporting Countries will not cut production, even if the oil price falls to $20 (R233) a barrel, the cartel's de facto leader said, spelling out a dramatic policy shift that will have far-reaching implications for the global energy industry.

In an unusually frank interview, Ali al-Naimi, the Saudi Arabian oil minister, tore up Opec's traditional strategy of keeping prices high by limiting oil output and replaced it with a new policy of defending the cartel's market share at all costs.

"It is not in the interest of Opec producers to cut their production, whatever the price is," he told the Middle East Economic Survey. "Whether it goes down to $20, $40, $50, $60, it is irrelevant."

He added that the world may never see oil at $100 a barrel again.

The comments, from a man who is often described as the most influential figure in the oil industry, marked the first time that al-Naimi has explained the strategy shift in detail.

His remarks represented a "fundamental change" in Opec policy that was more far-reaching than any since the '70s, said Jamie Webster, oil analyst at IHS Energy.

"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."

Analysts say Saudi Arabia is throwing down the gauntlet to all the high-cost sources of crude - including Canada's oil sands, US shale and deepwater oil off Brazil and the Arctic - to try to face down the threat they pose to its market share.

Al-Naimi said that if the kingdom reduced production, "the price will go up and the Russians, the Brazilians, US shale oil producers will take my share".

Oil has slumped nearly 50% since mid-June amid a massive supply glut fuelled by surging US shale output, combined with weakening demand in Europe and Asia.

In the past, Opec has cut production when prices fall, notably during the 2008 financial crisis.

But at the cartel's meeting in Vienna last month, members held output steady at 30million barrels a day, sending prices into a tailspin.

The price plunge has thrown the economies of big oil exporters such as Russia and Venezuela into disarray and forced oil companies across the world to rewrite their investment plans.

But it could prove to be a major boon for the global economy. The International Monetary Fund said this week that a prolonged price slump would boost global growth by up to 0.7% next year and 0.8% in 2016.

China would be the biggest beneficiary, with its GDP boosted by up to 0.7% next year and 0.9% in 2016.

Oil prices fell further as markets digested al-Naimi's remarks. Brent crude, the international oil marker, is now hovering at five-and-a-half-year lows.