In 2014 Saudi Arabia led OPEC in a decision to keep output high to defend its market share.
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OPEC decided last week to keep its output ceiling at 30 million barrels a day.
Oil prices resumed their slide on Tuesday, with USA crude falling below $37 (U.S.) per barrel and Brent below $40 for the first time since early 2009, amid fears the world was running out of storage capacity as a global glut intensifies.
Some traders say prices may see nudge slightly higher in the near term, thanks to bargain-hunting but the long term view remains bleak as oil production, both in and outside of the cartel, remains high. On Tuesday, oil prices recouped some losses but still remain near their lowest levels since early 2009, when the world economy was in its deepest recession since World War II.
Brent for January settlement was at US$40.97 a barrel on the London-based ICE Futures Europe exchange, up 24 cents, at 4.51pm Seoul time.
USA oil production rose from 5 million barrels a day in 2008 to an estimated 9.3 million barrels a day in 2015.
“OPEC is sending an ultimatum to its competitors: the fall in oil production should come from them”, OCBC bank said.
OPEC’s output of more than 30 million bpd has compounded an oil glut, pushing production 0.5 million to 2 million bpd beyond demand and putting many producers under pressure, especially small-sized USA shale drillers that have piled up large amounts of debt. A weaker euro helps stocks by making European exports cheaper and competing imports more expensive.
United States benchmark West Texas Intermediate (WTI) for January delivery was up 16 cents at $37.81 and Brent crude for January was trading 26 cents higher at $40.99 at around 0810 IST.
Oil prices are in free fall since late Friday when OPEC made a decision to not declare an official quota in Vienna, but instead announced a continuance of actual production levels.
“While all eyes are now on the Federal Reserve as it meets next week for the last policy meeting this year to decide whether to raise its benchmark rate, economic data from China will set the tone of prices in the coming weeks”, EY analyst Sanjeev Gupta said. “Any tiny risk that Opec actually might do something in the next six months is completely off the table after Friday’s meeting”, said Bjarne Schieldrop, an oil analyst at SEB in Oslo.
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But oil companies, their employees, and their subcontractors are feeling the pinch from lower prices. The U.S. economy is growing, but more-efficient cars have blunted the need for more fuel. But Prawiraatmadja said Indonesia also does not want depressed crude oil prices because that would impact much needed investment in the country’s oil sector.
