Iraq is keeping its production plans, the country’s oil minister Adel Abdel Mahdi said on Thursday when asked if the country would be prepared to freeze its output.
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“Saudi Arabia seems content to wait for lower non-OPEC supply and stronger demand to lift prices next year”, said Julian Jessop, analyst at Capital Economics research group. Alarmed by the growing supply of oil from non-traditional producers using fracking to access oil in shale deposits like the Bakken field in North Dakota, Opec was determined to stop this competition.
“I believe from the perspective of low-priced producers and retaining market share for the future, it is the right strategy”, said Khaldoon Al Mubarak, the chief executive of Mubadala, one of Abu Dhabi’s sovereign funds.
“What OPEC have on their side is the market is in quite a bearish mode, so there are quite a few shorts out there… if we see anything that resembles a move towards stabilising the the price, then we could see (oil) move 20 or 25 percent higher within a very short period of time” he said. It comes after Russian Federation has been working its way into Saudi Arabia’s once undisputed market in Asia for the past decade. Now they hover just off 2009 lows, around $44 a barrel for Brent and $41 for WTI.
Brent for January settlement climbed as much as 88 cents to $43.37 a barrel on the London-based ICE Futures Europe exchange and was at $43.23 at 2:34 p.m. Hong Kong time.
Reuters reported that Iranian news agency Shana said Zangeneh asked other cartel members to make room for Iranian oil.
According to a survey by Bloomberg, OPEC production in November rose to an above-target 32.1 million barrels per day (mbpd). According to his estimates, only 70% of shortfall in production can be substituted with the price of $40 a barrel.
A change in the amount of oil coming out of OPEC is unlikely.
“We are maintaining our view that apparent demand growth in 2016 will ease to under 2% on the back of slowing economic growth momentum”, said Platts China Oil Analytics senior analyst Yen Ling Song in a statement.
One possible scenario is for OPEC to recognize the fact that members are pumping well in excess of the formal ceiling, raising the group’s collective quota from 30 million bpd to 31.5 million bpd, in line with the current volumes. Both crude contracts settled up 3 percent on Thursday.
Even though the equipment at Iran’s oil facilities in West Quroon is badly out of date, Iran’s petroleum minister says after eight years of sanctions, failure to boost production is not an option.
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He said this is specifically necessary given that all member states have suffered from the falling oil prices.
