After all, there are serious victims of the policy carried out by the OPEC in the ranks of the cartel, in particular, Venezuela, which recently launched a number of initiatives on measures to stabilize oil prices.
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During its recent meeting in Vienna last Friday, the Organization of the Petroleum Exporting Countries decided not to slash the organization’s oil output despite sliding prices at a time that Iran is expected to increase its production next year.
Friday’s news pushed oil prices down, with the US benchmark rate sliding 2.7 percent on the day to $39.99.
The group had the option of reducing its production ceiling, which had been at 30 million barrels per day for several years, to help stabilize prices. Or is it the lowest level that oil prices can fall in order for OPEC countries to meet their annual budget without experiencing any deficit, which ranges between $55 and $60 per barrel?
Guided by its biggest producer Saudi Arabia, OPEC has maintained output to force higher-cost producers to scale back their operations.
The cartel is pumping out around 32 million barrels daily – a figure that is set to rise in coming months as Iran looks to produce more crude following the lifting of sanctions – while OPEC appears to have abandoned its target following Friday s meeting.
“I find (Iranian oil minister Bijan) Zangeneh astounding”, Croft said, noting Tehran’s confusing signals of raising its own output while demanding cuts from other members.
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.
All the same, on Friday morning, most delegates and experts anticipated a relatively straightforward meeting that would bless the free-market policy and rubber-stamp a production ceiling.
In 2016, the western sanctions on crude oil production are planned to be lifted, leading Iran to tell Saudi Arabia to reduce its oil production levels while the former prepares to ramp up its export operations.
OPEC believed that a production cut would not be sufficient to completely clear the current supply overhang. “Even if we keep cutting that doesn’t solve anything”, said OPEC President Emmanuel Ibe Kachikwu. The ceiling of 30 million barrels a day, in place since 2011 and now abandoned as too rigid, is exception, Bloomberg said.
“The conference failed to curb oversupply, as it banked on non-OPEC supply to drop in 2016, when the market is expected to experience a surge in demand”.
“In our view, the lack of guidance on a production quota underlines the discord among members”, said Barclays analyst, Miswin Mahesh.
Before the speculation on the production cut by OPEC, worldwide crude oil prices incurred losses earlier in the week amid lingering concerns over the impact resulting from a supply glut.
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Saudi Arabia is “being hit from all angles, facing direct challenges from Russian, Iranian and Iraqi crudes”, according to a Thomson Reuters Oil Research and Forecasts special report published on Thursday. “So staying the course makes sense for the Saudis”, said veteran OPEC watcher Gary Ross, founder of Pira Energy thinktank.
