The dollar rose, which would ordinarily depress oil prices as this strength can encourage non-US investors in crude to sell their holdings in exchange for a higher profit in their own currency.
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At the press conference following the ministerial meeting, the President of Opec, Nigeria’s oil minister Emmanuel Ibe Kachikwu, explained the thinking behind Opec’s decision.
The inaction on OPEC’s part, combined with the bullish production statements from ministers, exacerbated already-tense fears of oversupply in the global crude market and sent Brent and USA oil prices lower, dragging down US energy stocks with them. How production outside the cartel responds to prices over the next six months is also under consideration.
Indonesia’s re-entry will “simply acknowledge the reclassification of Indonesian output from non-OPEC to OPEC production”, said Julian Jessop, analyst at Capital Economics research group.
Over the a year ago OPEC has altered its approach of favoring price control over production in an effort to regain market share.
Mr Kachikwu suggested the group could convene again before June in what would be an extraordinary meeting for the cartel.
On markets Friday, US oil benchmark West Texas Intermediate (WTI) for delivery in January was down $1.04 at $40.04 a barrel. He said he expected OPEC to maintain production policies on Friday. “They want to see non-Opec countries cut supply before they take action”.
Accordingly, in time with the 50 per cent decline in oil process and lack of balance between supply and demand, some OPEC members like Iran and Venezuela had called for the restoration of quotas system as well as lowering of the production ceiling.
“Iran is coming and we don’t know when it is coming. So we chose to postpone the decision until the next Opec meeting, when the picture will be clearer”.
An internal OPEC document reviewed by The Wall Street Journal showed that, if current production remains unchanged, markets will still be oversupplied by 700,000 barrels a day in 2016-though that would be less than the glut of 1.8 million a barrel a day OPEC estimates for this year. But it later transpired that this was the level Opec ministers had pegged as the group’s current output level.
Saudi Arabia yesterday reiterated its stance that it would be willing to cut as long as non-OPEC also reduces its output.
In the meantime, this is no consolation to those members of Opec who have been particularly badly affected by the collapse in crude oil prices from $115 a barrel in June 2014 to close to $40 a barrel today.
Brent for January settlement slipped 84 cents, or 1.9%, to end the session at $43 a barrel on the London-based ICE Futures Europe exchange. “We didn’t decide to do anything”.
The cartel published no figures on output in its communique, as it awaits increased output from Iran after sanctions were lifted on the Islamic republic.
Earlier in the day, Mr Zangeneh said limiting Iran’s output was “not a matter of negotiation”.
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“The heavy pressure on non-OPEC producers, especially US shale, is going to be kept up”, said Paul Horsnell, head of commodities research at Standard Chartered.
