“One group thought there needed to be a production ceiling which, as well as stabilising the market, would also control the current oversupply in the market”, Iran’s oil minister said.
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The group set aside the previous daily output target of 30 million barrels, a ceiling breached for 18 months.
U.S. benchmark West Texas Intermediate for delivery in January was down 33 cents at $39.64 and Brent crude for January was trading 22 cents lower at $42.78 a barrel shortly before 7am Irish time.
Maintaining production would be a victory for Saudi Arabia which has been under pressure from OPEC’s poorer members to cut output to bolster prices.
OPEC, founded over 50 years ago to maintain effective oil prices, today, in fact serves as a stand-alone business enterprise with its own interests, putting great pressure on the market.
LONDON – Oil prices edged closer to 2015 lows on Monday after Organisation of the Petroleum Exporting Countries (Opec) failed to agree on a production curb to stem sliding prices and a stronger dollar made it more expensive to hold crude positions.
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 $40 a barrel. Is it the lowest cost for producing one barrel of conventional oil, which is below $10, or is it the current oil price of $45?
Saudi Arabia, along with its allies in the Persian Gulf announced their willingness to reduce oil production if producers in Russia, Iraq and Iran will do the same. This would add to the global glut, given that the world is consuming up to 2 million barrels a day less than it is producing.
OPEC had declared that the demand for oil would still grow even though its price has been falling. The budgets of USA consumers continue to increase as the price of Gasoline at the pump falls below $2.00 per gallon. In addition, with the signing of the Iranian nuclear deal, oil and gas production from the region is expected to rise, once Western sanctions on the country are lifted.
Nonetheless, Opec believes the worldwide demand for oil will grow in 2016 on the back of a projected global growth of 3.4% compared with 3.1% this year.
Mr Pouyanne added that he was not surprised by OPEC’s decision last week against slashing high output levels. U.S. crude was trading at $39.14 a barrel, down 83 cents.
Currently, many analysts are confident that OPEC’s inaction increases the risks for further decline in oil prices.
Saudi Arabia, the world’s largest oil exporter, is also the cartel’s most influential member. He saw a drop of oil prices to $20 per barrel from the recent $44 per barrel.
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Lower prices are affecting Saudi Arabian Oil, known as Saudi Aramco, and the company is taking “fiscal discipline measures” in response, Nasser said.
