Oil prices fell to their lowest levels in seven years, after OPEC officials failed to agree Friday on how to address the global supply glut.
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“The logic is simple”, he said, of OPEC’s present clout in a market where non-members such as Russian Federation and US shale producers play an increasingly large role.
“OPEC agreed that member countries should continue to closely monitor developments in the coming months”, a statement from the group said. Instead, it went all in for the one-year-old Saudi Arabia-led policy of pumping, pumping, pumping until rivals – external, such as Russian and U.S. shale drillers, as well as internal – are squeezed out of market share.
Brent futures fell $US1.96 to $US41.05, after sliding to $US40.95, their lowest since March 2009. It’s gotten so bad that a “traffic jam” has emerged in the U.S. Gulf Coast of oil supertankers waiting to be offloaded.
Reports had surfaced suggesting Saudi Arabia, the biggest crude producer, wanted to propose an agreement that would balance oil markets.
Goldman Sachs said after the OPEC-meeting that it expected oil prices to remain “lower for longer”, with a risk that oil prices could fall as low as $20 per barrel.
The January contract for West Texas Intermediate crude sank $2.32 to $37.65 a barrel on the New York Mercantile Exchange, a drop of 5.8 percent. The swelling oil glut has triggered more than 60 per cent fall in crude prices since June 2014.
That plan clearly hasn’t worked, with benchmark USA crude’s value falling by more than 40 percent over the past year and now hovering around the $40 mark per barrel.
Although it is expected to take months or even years before the sanctions are fully lifted and the effects have vanished, a production limit would be devastating for Iran’s oil industry ahead of the implementation day.
CRC, which was targeted as “worthless” by hedge fund BlueMountain Capital Management LLC in June, fell 16 percent in NY trading, the steepest intraday slide since August 24.
The strong dollar keeps further downward pressure on oil prices. Trade data are due on Tuesday, inflation on Wednesday and retail sales, industrial production and fixed asset investment on Saturday.
Analysts at Barclays said the lack of an Opec production target in its written announcement was a sign of discord.
CURRENCIES: The dollar was trading at 123.25, up from 123.12 yen on Friday.
What’s more, he says, the cutbacks in USA drilling should yield more tangible impacts by next year.
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Kachikwu, the conference president who also represented Nigeria at the meeting, acknowledged that continued low prices will hurt his country.
