January Brent crude, the global oil benchmark, dropped 84 cents, or 1.9%, to close at $43 a barrel on Londons ICE Futures exchange.
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OPEC has reportedly agreed to raise its production ceiling to 31.5 bpd. “OPEC doesn’t mind that member countries are struggling to meet their budgets nor does the 31.5 million b/d quota really matter”.
The Organization of the Petroleum Exporting Countries (Opec) has decided against cutting its oil output to lift prices, its president and Nigerian Oil Minister Emmanuel Ibe Kachikwu said following a meeting here yesterday.
OPEC’s moves on Friday mean there is no end in sight for the glut plaguing the crude market.
The divisions are a sign of how a year of low prices – and the prospect of more months of cheap oil – are hurting OPEC nations. “That in turn will cause a rise in the value of the US dollar (USD), and that’s not a good thing for the price of oil that happens to be priced in this currency”.
Saudi Arabia’s Minister of Petroleum and Mineral Resources Ali Ibrahim Naimi arrives for a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Friday, Dec. 4, 2015. These dissenters include Algeria, Angola, Nigeria and Venezuela, which warns oil could sink to $30 a barrel if OPEC doesn’t act.
For while much has been made of the “breakeven” cost of oil production over the a year ago, it is the “cash cost” which determines the actual floor for oil producers. “Shale is the new reality”. He didn’t say whether a review would entail a special meeting of the group before its next scheduled gathering in about six months.
Jamie Webster, senior director at IHS Energy, told Xinhua that OPEC is not yet ready to cut the oil production. He said he expected OPEC to maintain production policies on Friday. Olivier Jakob of the Swiss oil consultancy Petromatrix estimated on Friday that Iraqi oil production surged in November to a record high of 4.6 million barrels a day, an increase of 1.4 million barrels over the same month a year ago.
If rising oil demand was not bad enough for the health of the planet, governments are making it worse by their lame response to ending fuel subsidies as prices fall.
Oil prices – along with other commodity prices – have plummeted over the past year due to both demand and supply forces.
OPEC’s decision to stand pat effectively kicks the can down the road to its next meeting. “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”.
According to Reuters, Badri said Iran complicated efforts to come to an agreement on production. “How clear can we be?”
For its part, Iran has repeatedly said it would add 1 million barrels of oil to the market each day when economic penalties are lifted. That is, OPEC acknowledged it is not prepared to cut for the foreseeable future, so the elevated levels of production will continue. Yet the cartel’s biggest member, Saudi Arabia, has expressed a willingness to cooperate with a big caveat-others must cut production, too.
Yesterday, there was no talk of even setting a production target that member countries could then disregard.
Dominic Haywood, oil analyst at Energy Aspects, said eyes at the meeting were on Saudi Arabia. Despite differences of opinion among members, OPEC has “common purpose” to find a solution to the price rout.
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Bill Spindle and Nicole Friedman contributed to this article.
