At the end of their meeting, member nations of the Organization of the Petroleum Exporting Countries surprisingly failed to agree on how much oil to produce.
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In examining the current status of the oil market, the Conference respected the input and ideas of all Member Countries to find ways and means to deal with the challenges they are facing in the global oil market today. OPEC’s position is that we are glad to see Iran recovering out of sanctions and back to the market place.
OPEC’s Friday statement “implies to me that they’re comfortable with their current production”, said Rob Haworth, senior investment strategist at US Bank Wealth Management, which oversees $US130 billion.
The Organisation of Petroleum Exporting Countries (OPEC) has named Mohammed Al Sada to succeed Nigeria’s Ibe Kachikwu as the organisation’s conference president.
A year ago, Riyadh spearheaded a decision to maintain output and fight for market share rather than cut production to sustain high oil prices.
But only a few members appeared ready to cut output in an attempt to drive up prices.
Most market participants had expected OPEC to stick to its ceiling of 30 million barrels a day.
The failure to reach any agreement on curbing global production, which now exceeds global demand by about 2 million barrels a day and has left a glut of oil on world markets, put additional pressure on oil prices December 4.
Opec will stick with its policy of not constraining output and has all but abandoned its official production target at its semi-annual meeting, risking a further drop in oil prices that are now close to six-year lows.
OPEC has informally set a record oil-output ceiling of 31.5 million barrels a day, a level that’s in line with the group’s most recent production estimate. The group accounts for about a third of world oil output and does not include Russian Federation or the USA, which rival Saudi Arabia as the world’s biggest producers. “Even if the prices rebound though, there will still be layoffs”, he said.
Global oil stockpiles have risen to record levels as Saudi Arabia, Russia and Iraq boosted supply, the IEA said on November 13.
West Texas Intermediate crude for January delivery dropped 91¢, or 2.2%, to $40.17 a barrel at 11:56am on the New York Mercantile Exchange. But Saudi Arabia has been content to keep production up, which has squeezed profits for producers in non-OPEC countries, including the United States.
He said that most companies bet on around $60 per barrel for oil prices, and as long as the prices remain well below that, the stress on the market will continue and in the upcoming weeks there will be an acceleration in layoffs if oil prices do not rebound.
“OPEC is not a cartel”, the Saudi oil minister Ali al-Naimi said Friday before the gathering.
That plan 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 $40 mark per barrel.
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Analysts said the decision shows OPEC remains determined to continue pumping aggressively, putting pressure on USA shale producers and other sources of non-OPEC production in what amounts to a price war.
