Oil tumbled below $40 a barrel earlier in the session after Reuters, citing unidentified OPEC sources, reported the cartel had agreed to raise the production ceiling to 31.5 milion barrels a day.
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As the meeting convened, conference president Emmanuel Ibe Kachikwu described the oil industry as “in the midst of another challenging cycle”.
Kachikwu stated that the conference was centered on enhancing market stability which would benefit all stakeholders and contribute to global economic growth, stressing that this can be achieved only through the concerted efforts of all stakeholders.
The oil cartel announced Friday that it was postponing its decision on the production quota until its next meeting in June, and said it will instead continue to produce at its actual level, instead of the official level of 30 million barrels per day.
Friday’s announcement sent ripples through wider markets and dented shares of USA energy drillers already suffering from low prices, but losses in oil futures were limited as prices hit key support levels around US$40 a barrel. U.S.-traded stock in British oil giant BP PLC (NYSE:BP) dropped 2.1 percent to $32.58 while France’s Total SA (NYSE:TOT) fell 2 percent to $47.24.
“What OPEC have on their side is the market is in quite a bearish mode, so there are quite a few shorts out there … if we see anything that resembles a move towards stabilising the price, then we could see (oil) move 20 or 25 percent higher within a very short period of time” he said.
Saudi Arabia yesterday reiterated its stance that it would be willing to cut as long as non-OPEC also reduces its output.
Analysts say the 12 members appear to be divided, with Saudi Arabia and its Gulf partners at odds with others pushing for a cut in output in a bid to perk up prices.
Iraq’s Minister of Oil Adil Abd Al-Mahdi speaks to journalists prior to the start of a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Friday, Dec. 4, 2015.
A significant change in policy could only happen if some of the bigger producers outside of OPEC, such as Russian Federation, made a decision to join in a coordinated reduction in output.
Of course, as many predicted, OPEC has failed to set any new production limits at this important meeting.
NEW YORK – Oil prices fell on Friday after news that Organisation of the Petroleum Exporting Countries (Opec) was planning to maintain its production near record highs, despite depressed prices, as the producer group continued to seek share of an oversupplied market.
For its part, Iran has indicated that it would not take part in any cartel-wide cuts until its own output returns to pre-sanction levels.
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For the past two years, OPEC has exceeded its self-imposed crude production limit of 30 million barrels per day.
