The week’s highlight is an OPEC policy meeting on December 4 about whether to adjust its production strategy in light of weak oil prices.
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In years gone by such a sharp decline in prices would typically trigger a series of extraordinary Opec meetings, but the group has resisted the temptation to convene outside the last scheduled meeting in June, where it took the decision to maintain current production. “So to use the Saudis’ own logic, as far as Iranian production goes – bring it on”.
Depressed oil prices are likely to linger longer as analysts dropped their predictions further for next year, according to a Reuters poll, assuming OPEC will not cut output when it meets on Friday.
Wittner, in an interview, said he expects the OPEC meeting to be contentious. The cure for the problem of low oil prices is a low oil price.
The IEA expects demand to grow by 1.2 million bpd in 2016, down from 1.8 million bpd this year.
“There is a real risk that we could see lower prices”, said CMC’s Spooner.
Prices have fallen by almost half since summer previous year because of excess supply In November, Nymex prices for January delivery lost $4.94 a per barrel, or 10.60%, to $41.65.
“It plays into the strategy course that Saudi put the Opec on”.
One member of OPEC, Venezuela raised the idea of keeping the prices of oil within a particular range. But with oil prices below US$50 per barrel, they will have a tough time finding the money to pay for security and other key government services.
Is Saudi Arabia now calling it quits? The position triggered an extended battle with USA shale producers for market share, flooding markets with a glut of oversupply. The number of rigs drilling for oil in the USA has collapsed as shale producers fold and sell off assets.
E&P stocks showed similar resolve ahead of that fateful OPEC meeting a year ago.
Iran has said it plans to pump an additional 500,000 barrels a day once worldwide sanctions over its nuclear program are lifted. With so much oil around, the nation will only resume exports gradually, rather than pushing discounted shipments on buyers, he said. Standard and Poor’s recently cut the kingdom’s credit rating amid fears that its reliance on energy could drive up the budget deficit.
King used historical evidence to support his argument, noting that “if you look at the path of oil prices, the surprises to oil prices over the last 15-20 years, they closely correlate to the waxing and waning of the Chinese economy”.
Opec members now unwitting allies in push to defend oil market share.
Petromatrix, an oil research firm, struck a more nuanced tone, stating that, while the cabinet’s comments can not be viewed as a sign that a production cut is imminent, it does signal a slight shift in tone.
However, the respondents were more evenly split on the timing of when Iran could return crude to the market in a significant way.
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Last November, OPEC rattled markets when it left its production ceiling above 30 million barrels per day. Back then, OPEC’s production was roughly the same as it is now.
