Most market participants had expected OPEC to stick to its ceiling of 30 million barrels a day.
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The Organization of the Petroleum Exporting Countries (OPEC) concluded its semi-annual meeting Friday in Vienna with a press release congratulating Nigeria’s new minister of state for oil and announcing the election of Qatar’s minister of energy and industry as the group’s leader for the coming year.
On the New York Mercantile Exchange, January West Texas Intermediate crude dropped $1.11, or 2.7%, to finish at $39.97 a barrel, after touching a $39.60 low.
According to the U.S. Energy Information Administration, American oil producers produced an average of about 9.3 million barrels of crude oil per day in June, the latest data immediately available, adding to the global oversupply.
The world has too much oil, and OPEC is trying to keep prices low to defend its market share against rivals like the USA where oil costs more to extract and refine.
Opec looked unlikely to take steps to cut oil production to lift languishing prices at a meeting on Friday, potentially worsening one of the worst crude gluts in history. The crude being pumped out of US shale formations helped create a global glut that’s pushed prices down by more than 50 percent since June 2014.
The agreement to keep output near record highs was largely expected, but wiped out any remaining hope for bulls that production cuts could push prices higher, sending ripples across wider markets.
Saudi Arabia had hinted at cuts in output – but only if OPEC and non-OPEC members followed suit.
In the past, OPEC-which pumps about four out of 10 barrels of oil consumed each day around the globe-has throttled back on output to support prices.
So far it has not done that – it has put poorer OPEC members’ finances under vast pressure. While that country’s production goes mostly for domestic consumption, that move could also add some to the total amount of OPEC barrels on sale.
With the International Energy Agency predicting the nation will import 40 per cent of its oil needs by 2018, the world’s biggest producers are getting a consumer in their midst. The market is oversupplied by as much as 2 million barrels a day, Zanganeh said this week, equivalent to about 2 percent of global output.
“We have said on more than one occasion, we are willing to cooperate with anyone who can balance the market”, Saudi Arabia’s Oil Minister Ali al-Naimi was cited as saying by Reuters.
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“I don’t see how anybody in their right mind thought that the Saudis were going to cut production”, said Mike Breard, oil company analyst at Hodges Capital Management in Dallas.
