“There is some probability that OPEC might in fact announce an increase in its quota by a million barrels a day to accommodate the re-entry of Indonesia as a member”, Vyanne Lai of National Australia Bank said.
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Crude oil prices extended gains on Friday, as the dollar slumped against the euro, although market focus is fixed on an OPEC meeting in Vienna where the group is expected to reiterate its high output strategy.
Oil minister Ali al-Naimi told a Riyadh conference in April that Saudi Arabia was ready to revive prices “but with the participation of the main producing and exporting countries and based on clear principles and high transparency” – a sentiment repeated by officials many times since then.
Outside of OPEC, Russia alone pumped out 10.7 million barrels of oil a day in November, while on Thursday it again insisted that it would not be cutting back its own output to help the cartel.
Should OPEC surprise markets and agree to a reduction, Iran still plans to pump out additional crude from the beginning of 2016. Most market participants say the cartel will likely maintain the policy until the effects of Iranian oil returning to the market in the coming months become more apparent.
Iran’s oil minister also dismissed the possibility of limiting Tehran’s production ramp-up once Western sanctions are lifted.
Transocean (RIG – Get Report) stock is up 3.18% to $14.27 in early afternoon trading on Thursday as oil prices increase and boost energy stocks. “Just adding Indonesia is most probably what will happen”. The nation won’t accept any cuts that would bring its output below the pre-sanctions level of 4 million barrels a day, Zanganeh said Thursday.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January CLF6, +1.45% traded at $40.53 a barrel, up $0.60, or $1.50 in the Globex electronic session.
Ecuador Oil Minister Carlos Pareja said the pre-meeting – unusual in recent years and held in a hotel rather than at OPEC’s headquarters – was “difficult”.
In spite of the oil price bumping around its lowest in almost seven years and the finances of OPEC members creaking under the strain, Saudi Arabia has shown no signs of backing down without support from other producers, and analysts said the new details did not suggest any weakening in its resolve. “Expect to step into another year of oversupply, with a lot of oil moving into storages and continued pressure on prices”, Platts’ Asia Editorial Director Vandana Hari said.
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Capital Economics’ Pugh, for one, thinks that prices could see a recovery in 2016 as demand remains strong and non-OPEC production wanes.
