On Business Middle East this week we analyse the repercussions of the latest OPEC meeting decision.
Advertisement
“OPEC produces only about 35 to 40 percent of world consumption”.
The oil price rout is also spilling into equity markets, with Asian stock markets teetering near their weakest levels in three weeks on Tuesday as shares of energy firms were hit hard.
Oil prices haven’t been helped by the so-so economic environment around the world.
With oil dropping to the lowest in more than six years after the Organization of Petroleum Exporting Countries meeting on Friday, further downgrades are probably on the way.
Euronews asked the Saudi Oil Minister, Ali al Naimi, if there are any plans to coordinate with Russian Federation to stabilise the market.
“While this outcome reflected the market consensus expectation, oil prices nonetheless weakened”, observed commodity strategists Harry Tchilinguirian, head of commodity and oil strategy and Gareth Lewis-Davies, oil strategist at BNP Paribas.
“As China continues to support the expansion of its (independent) “teapot” refineries, allowing more imports of crude oil, we expect this pattern (of high product exports) to continue”, ANZ said. The OPEC president mentioned another meeting could occur before the now scheduled 2 June 2016 meeting.
So just how likely is that? However, with some OPEC members like Venezuela pushing for the group to control prices, it’s possible that some sort of move to push prices higher will eventually come up.
“Past communiques have at least included statements to adhere … or maintain output in line with the production target (of 30 million barrels per day)”. Oil ministers dropped reference to the group’s output ceiling, highlighting tension among member countries and leaving themselves free to pump into a massively oversupplied market.
All the same, on Friday morning, most delegates and experts anticipated a relatively straightforward meeting that would bless the free-market policy and rubber-stamp a production ceiling.
Today’s low was the lowest level seen since Feb 20, 2009, a day when prices bottomed at $36.91.
He added that the decision “suggested that the organisation was effectively abandoning its long-term strategy of limiting production and acting as a cartel, leading to more downward pressures on oil prices in the short term”. The only likely change, so it seemed, might be raising the figure to 31.5 million bpd to reflect current output rates, rather than the long-exceeded 30 million bpd last reset four years ago.
Markets are watching whether the Fed will raise interest rates on December 16.
Advertisement
United States (US) stocks fell on Monday (Dec 7), led by the S&P energy index’s biggest one-day percentage drop since late August as oil prices slid to their lowest point in almost seven years. With inventory levels at or near all-time highs, the amount of oil out there is significant enough to cause prices to be well below the more than $100 per barrel they traded at last year but investors should keep in mind that there exists one piece of data that implies meaningful upside for the price of crude within the next year.
