The Organization of the Petroleum Exporting Countries on Friday decided against cutting its oil output despite sliding prices and higher production expected from Iran.
Advertisement
Indonesia’s re-entry will “simply acknowledge the reclassification of Indonesian output from non-OPEC to OPEC production”, said Julian Jessop, analyst at Capital Economics research group. The benchmark was within cents of August’s 6-1/2-year trough.
“There was some short covering before the announcement in case there was a production cut”. “It shifted the market back to fears of oversupply”.
Oil prices were briefly lifted overnight by news that Saudi Arabia, the de facto leader of the cartel, would propose a production cut only on the condition that non-OPEC members, such as Russian Federation, also adhere to the cut.
He rejected claims that OPEC was now divided over policy going forward with some members openly calling for a cut in production in the wake of tumbling oil prices since June 2014.
In June previous year, crude had traded above $100 a barrel, but has since plunged on a global supply glut, weak demand growth and a strong dollar.
“We are only 35 percent of the producers and there are still 65… percent producers out there”, said conference president Emmanuel Ibe Kachikwu. The S&P Energy index.SPNY fell on Friday, helping cap gains in the wider stock market.
Also on Friday, Baker Hughes reported its weekly count of US oil rigs fell by 10 to a total of 545, compared with 1,030 a year ago.
The pain could continue.
Advertisement
An internal OPEC document exclusively viewed by the Wall Street Journal showed the cartel, which supplies around 40% of global oil supply, believes if it trims daily output down to 30 million barrels versus the current 31.5 million, it “would not be sufficient to completely clear the current supply overhang”, due to large inventories.
