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Crude oil prices hammered on OPEC policy
In a statement, the group noted that it expects non-OPEC supply of oil to actually contract next year, even as demand rises.
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According to secondary sources, currently, OPEC countries are producing 31.3 million barrels of crude per day which marks 1.3 million barrels more than the ceiling set for the organization. That strategy clearly hasn’t worked, with benchmark US crude’s value falling by more than 40 percent over the past year and now hovering around the $41 mark per barrel. Goldman’s long-term forecast for crude is at $50 a barrel.
Iran sees it needs the additional output to revitalize its oil industry and refill the coffers affected by years of USA and European Union sanctions over its nuclear program.
Surging oil production from non-OPEC nations like the USA has created a deep divide inside OPEC.
After Friday’s OPEC decision “everyone does whatever they want”, said Iranian Oil Minister Bijan Namdar Zanganeh.
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.
He said the group has been discussing production cuts with non-OPEC producers but those discussions were inconclusive so far. “Nothing has been curtailed”.
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.
In a surprise, OPEC failed to reach an official decision Friday on how much oil to produce. Russian Energy Minister Alexander Novak said Thursday that the country doesn’t see a production cut as viable. The group pumped about 31.4 million in October, according to estimates in its monthly market report.
Energy company shares, including those of United States oil major Exxon Mobil Corp and oil service companies Baker Hughes Inc and Halliburton Co fell after the Opec news.
The meeting was held to explore ways of lifting languishing prices and turning the global oil market around. Despite differences of opinion among members, OPEC has “common purpose” to find a solution to the price rout.
Adding to the glut is Russian Federation pumping at near record levels and increasing North Sea shipments, while crude stockpiles in the U.S., the world’s largest consumer, have expanded to more than 120mn barrels above the five-year seasonal average.
Faced with dismay among members unable to balance their books, Saudi Arabia has adopted a conciliatory tone, promising to listen to all before a policy decision is made.
“However, it could mean that Opec will cut production next year either at its meeting in June or more likely, December”, said Mr Andlauer.
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“I need to be living in a world where my grandchildren and my great-grandchildren will be able to live in a healthy environment”, said Ahmad Belhoul, chief executive of a state-owned Abu Dhabi company, Masdar, that is at work on various solar-energy projects for the government.