OPEC surprised markets by effectively abandoning its 30 million-barrel-a-day output target last week and endorsing current production of about 31.5 million, pushing prices to the lowest level since the financial crisis in 2009.
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As it became clear last week in Vienna that a push for oil production cuts was failing, ministers from Venezuela, Algeria, Iran and Ecuador huddled around OPEC’s conference table and tried a different tack in their quest to boost crude prices.
Brent crude futures were down 60 cents at $39.13 a barrel at 1058 GMT, bouncing slightly from a session low of $38.90.
“Prices have tumbled yet again as many investors try and position themselves ahead of the weekend, and also next week’s key Fed decision”. That tends to weigh on oil demand and pull prices lower.
With OPEC’s output at its highest since 2012, the organisation issued its final monthly report for the year on Thursday.
It added however that while the share of OPEC crude in global supply has fallen since 2008, in the first 11 months of 2015 it inched up 0.4 percentage points to 32.9 percent.
The price crash was exacerbated by the 12-member oil producing group, which is led by Saudi Arabia, deciding not to cut production to support prices.
WIT crude oil down WTI was trading down 48 cents, or 1.3%, at $36.29 a barrel, the lowest since February 2009. However, it added that “as inventories continue to swell into 2016, there will still be a lot of oil weighing on the market”.
Onshore oil storage is nearly full as we head into the New Year where demand in the first quarter is traditionally slow.
The global oil surplus will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the International Energy Agency. “Oil demand growth in 2015 is amongst the strongest seen in the past twenty years”, says Neil Atkinson, from Lloyd’s List Intelligence.
Investors also digested a bullish report from the Energy Information Administration (EIA) on Wednesday, which said that USA commercial crude inventories fell by 3.6 million barrels for the week ending on December 4.
The agency’s executive director, Fatih Birol, said this week that he expected prices to remain under pressure throughout next year. That’s about 400,000 a day more than the average required from the group next year.
“Non-OPEC growth year-on-year is grinding to a halt, so some of the effects from low oil prices are starting to appear”, said Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd.in London.
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Oil demand is still expected to grow next year at an estimated 1.25 mln barrels a day, down from 1.53 mln barrels a day this year.
