Western sanctions against Iran’s oil industry are set to be lifted next year, and Tehran has vowed to reach presanction production levels.
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”We have said on more than one occasion, we are willing to cooperate with anyone who can balance the market”, said Saudi Arabian oil minister Ali al-Naimi.
Oil prices have hovered near $US40 a barrel in recent weeks on ongoing concerns about the global oversupply of crude, which had sent prices plunging in late 2014.
OPEC’s Friday statement “implies to me that they’re comfortable with their current production”, said Rob Haworth, senior investment strategist at US Bank Wealth Management, which oversees $US130 billion. The organization is proposing to make a little over 1.5 million barrels of oil a day in addition to the customary 30 million to attempt to being the price of oil down.
“We don’t expect OPEC to do anything”, Iran’s Oil Minister Bijan Namdar Zanganeh said on Friday as the group’s ministers sat down to discuss policy, including how to fit new member Indonesia into its output ceiling. “That’s the argument that has carried the day in OPEC, and the heavy pressure on non-OPEC producers, especially US shale, is going to be kept up”.
Iran, which pumped 2.8mn barrels a day last month, according to a Bloomberg Survey, plans to boost supply by 500,000 barrels a day within weeks of sanctions being lifted and by 1mn barrels months later.
The agreement to keep output near record highs was largely expected, but wiped out any remaining hope for bulls that production cuts could push prices higher, sending ripples across wider markets. Oil prices went down with the announcements, dropping to $39.99 per barrel in the US.
The OPEC Conference President stated that the conference is centered on enhancing market stability which would benefit all stakeholders and contributes to global economic growth stressing that this can be achieved only through the concerted effort of all stakeholders.
Banks such as Goldman Sachs predict they could fall further to as low as $20 per barrel as the world produces more oil than it consumes and runs out of capacity to store the excess. In September, OPEC produced 31.57 million barrels a day, according to its own data.
Cheap oil that could get even cheaper: That’s the challenge OPEC ministers face as they try to cut their losses at a time when supply is outstripping demand.
Global oil traders say rising stockpiles will continue to weigh on the oil market and prices may not rally in the next two years.
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With OPEC countries producing an estimated 32 million barrels per day, above the group’s agreed 30 million barrel target, and with Iran expected to resume substantial exports next year, hopes were that the group would take steps to lower supplies. There’s less than a 50 percent chance that prices will drop to $20 a barrel, most likely when refineries shut in March for maintenance, Jeffrey Currie, head of commodities research at the bank, said in an interview earlier in September.
