Change in output requires returning to the former set and then the new set will be defined, Asali affirmed.
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Analysts at FX NEWS also believe that there were feeble chances of Saudi Arabia going for the proposal to cut the output.
The other country objected by Saudis is Iraq, as after the 2003 war on the country, the new government of Iraq holds that they have to be given an exception out of the quota system. “Saudi Arabia has large foreign exchange reserves, which allow it to have a particular loan limit, giving the opportunity to cover a significant budget deficits – its budget was based on a price of about $80 per barrel”, he said.
Heading into the Vienna meeting, the cartel’s dozen member countries from Africa, the Middle East and Latin America, had yet to strike an agreement on tackling an oil supply glut, with Iran insisting that it plans to up its own production early next year. Pressure on the group could build further as Iran comes out from under worldwide sanctions that have suppressed its production, and another six months of low prices eats away at the fiscal position of OPEC members. The official statement did not mention a target production level.
The cartel is expected to continue with its policy of pumping flat out, even though prices for Brent crude LCOF6, +1.23%, the worldwide benchmark, have fallen to less than $45 a barrel compared with highs of $114 a barrel previous year.
“In order for there to be a cut in production non-Opec must participate, Iraq has to participate and the Iran output picture has to be clear”, the delegate said.
“The pressure will build on OPEC and oil prices”.
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.
“While oil advanced (Friday)… there is really nothing much to cheer about”, said Bernard Aw, market strategist at IG Markets in Singapore. Iran will raise production by up to 1 million barrels per day following years of forced curbs because of the sanctions over its atomic programme, he added.
Venezuela has always been urging OPEC to make production cuts, since the price of a barrel of oil plunged in June 2014, with prices cut roughly in half and nearly reaching levels last seen in the 2009 recession. This is a policy that Saudi Arabia proposed in last year’s meeting.
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But Riyadh and its Gulf allies appeared on Friday to be ready to stick to their strategy of defending market share, hoping that lower prices would ultimately drive higher cost producers, such as USA shale oil firms, out of business.
