A year ago, Riyadh pushed through an Opec decision to defend market share instead of cutting output, keeping supply high in the hope of driving high-cost producers such as USA shale firms out of the market.
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Saudi’s motivation is simple – to drive U.S. shale producers out of business, believing that they will fall victim to lower prices long before the traditional oil producers of Opec.
Oil extended its losses in Asian Monday morning hours after OPEC said last Friday that it would maintain production at the current levels and made no decision on a new target ceiling.
OPEC countries are now producing an estimated 32 million barrels per day, above the group’s prior 30 million barrel target.
“I will be meeting one-on-one with other OPEC ministers to try and see how we can at least get to delay Iran flooding the market”.
Brent futures fell US$1.65 to US$41.35, after sliding to US$41.20, their lowest since March 2009.
Futures dropped as much as 1.9 per cent in NY after falling 4.2 per cent last week. The bank recommends increasing exposure to oil-related assets with a view that commodity prices are bottoming out.
Oil productions in the US are starting to climb new heights.
A report shows the world is already producing up to 2mn bpd more than it consumes now.
The oil price is unlikely to recover next year, according to the boss of the French energy giant, Total. It’s cut the profits of major oil companies such as Exxon Mobil Corp. and BP Plc in half while crude-rich countries such as Mexico and Russian Federation have watched their currencies plunge and their coffers shrink.
“A stronger dollar and the aftershock of Friday’s OPEC meeting are weighing on the oil market”, said Tamas Varga, oil analyst at brokerage PVM Oil Associates in London. It appeared for a while OPEC would raise its current 30 million barrels per day (bpd) cap on production, but negotiations broke down after Iran said it would not accept any limits until it emerges from Western-imposed sanctions.
This approach from Opec could send oil prices even lower as markets are likely to still fail to clear oversupply.
After Friday’s OPEC decision “everyone does whatever they want”, Iranian Oil Minister Bijan Namdar Zanganeh said.
Iran, which once pumped around 4 million barrels a day and is now down to about half that, is preparing to come back fully on line once it sheds nuclear-related sanctions in a few months.
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A senior Iran oil official said that Iran wanted to bring another 500,000 barrels to market each day by early in 2016.
