“The stock-build will continue to weigh on the market, with prices unlikely to move beyond the current range until well into 2017”, Chris Bake, a senior executive at Vitol Group, the biggest independent oil trader, said December 2. The benchmark was within cents of August’s 6-1/2-year trough.
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The cartel published no figures on output in its communique, as it awaits increased output from Iran after sanctions were lifted on the Islamic republic. Russian Energy Minister Alexander Novak said Thursday that the country doesn’t see a production cut as viable.
Brent crude oil, in a particularly volatile morning, was off roughly 2 percent to start trading in NY at $42.93 per barrel.
The Saudis have previously said they would be prepared to consider a cut only if OPEC members Iraq and Iran agreed to cooperate and non-OPEC members such as Russian Federation joined in.
Record output this year from Saudi Arabia, Russia and Iraq has boosted global oil stockpiles to an all-time high, the IEA said on November 13.
Led by Saudi Arabia and the Gulf states of Qatar, the United Arab Emirates and Kuwait, OPEC pumps about one-third of the world’s oil, and has faced recent pressure from its poorer members to cut output.
Jason Schenker, President of Prestige Economics, said, “Unsurprisingly, there was no change in OPEC’s stance given the current market dynamic with short term bearish implications for the market”.
While OPEC previously had a production ceiling of 30 million barrels a day, members have been producing closer to 31.5 million barrels a day, according to market estimates.
Stiff Iranian opposition to any attempt to rein in its oil production left the OPEC oil cartel divided and unable to agree on a plan of action at a meeting December 4.
Guided by its biggest producer Saudi Arabia, OPEC has maintained output to force higher-cost producers to scale back their operations.
Angolan oil minister Jose Botelho de Vasconcelos responsed to a question over whether Opec will maintain its policy by saying: “I think so, I think so”.
He said the conference was determined to enhance market stability to the benefit both consumers and producers and contribute to global economic growth.
“The market did not take the announcement out of OPEC very well today as OPEC appears to really be in disarray among its members and they took the path of least resistance, which was to do nothing and wait to see if things get better”, said Andy Lipow of Lipow Oil Associates. “We are only 35 percent of the producers an there are still 65 … percent producers out there”.
Cheap oil that could get even cheaper: That’s the challenge OPEC ministers face as they try to cut their losses at a time when supply is outstripping demand.
But Naimi said on Friday the report was “baseless”.
A final OPEC statement was issued with no mention of a new production ceiling.
The decision effectively leaves it up to individual members how much crude to pump and was a strong signal of OPEC’s eroding ability to act as a group in efforts to influence supply, demand – and prices.
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Ed Cowart, of Eagle Asset Management, points out that uncertainty over global supply was the “justification for $100-per-barrel oil a couple of years ago”.
