OPEC countries are to carry on producing current high levels of oil for the time being.
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The meeting at OPEC headquarters dragged on for more than six hours and was marked by deep fissures within the group, as some members pushed hard for a cut in production that might push oil prices up from their recent $40-$50-a-barrel range, less than half what they were 18 months ago.
An acrimonious meeting of member countries in Vienna broke up with no agreement on a new ceiling.
“I didn’t have any other expectation”, said Iran’s oil minister Bijan Namdar Zangeneh as he left the meeting.
He said world oil demand in 2015 grew by 1.5 million barrels per day, up from 1 million barrels per day in 2014, adding, “Next year, we foresee growth of 1.3 million barrels per day to average 94.1 million barrels per day, with most of this growth coming from non-OECD countries”.
Naturally, this doesn’t help the glut that’s already plaguing the global market. But Saudi Arabia has resisted calls to reduce supplies because other large members such as Iran – and non-Opec producers like Russian Federation – have declined to co-operate.
On the demand side, China is likely to double its strategic crude oil purchases next year to take advantage of low prices and will add 70 million-90 million barrels in 2016, according to a poll of analysts and data collected by Reuters analysts.
During a long day – Friday’s 168th ministerial meeting was the longest for many years – very strong rumours emerged that Opec meant to increase its 30m bpd production ceiling to 31.5m bpd to effectively formalise the production that now exceeds it. These rumours turned out to be false and instead Opecc stunned the press room with its decision to dispense with an official production ceiling.
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.
OPEC confirmed that Indonesia had returned to the cartel after a near seven-year absence, bringing the number of member countries to 13. OPEC requires consensus among members to alter its output ceiling.
Iran on Thursday said it would not bow to pressure for it to avoid increasing its production following the lifting of sanctions that had been imposed due to its disputed nuclear programme.
“This decision reflects the consensus going into the meeting of Opec’s policy for prices needing to find a floor to deter new non-Opec supply projects”, Gareth Lewis-Davies, London-based energy strategist at BNP Paribas, said by phone. Oil prices went down with the announcements, dropping to $39.99 per barrel in the US.
Tim Rezvan, an oil analyst with Sterne Agee CRT, said OPEC’s decision heralds a “bearish near-term event” for the USA oil industry. United States crude futures dropped over 2 per cent, or 96 cents, to $40.12.
“Dialogue and collaboration with consumers, non-OPEC producers, oil companies and investors are essential in reaching our common goal of a more orderly oil market”.
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But Naimi said on Friday the report was “baseless”.
