The Organization of the Petroleum Exporting Countries (OPEC) failed to agree in its policy meeting on Friday to lower production in an attempt to stem prices that have dropped more than 60 percent since June 2014. Instead, the organization’s endorsement of present output, which is more than 1.5 million barrels a day above the formal ceiling of 30 million barrels, is likely to push the price of oil down further.
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“We’ll wake up one morning and OPEC members will say we’ll cut production”.
Tim Rezvan, an oil analyst with Sterne Agee CRT, called the outcome a “bearish near-term event” for the U.S. oil industry.
A sharp increase in crude oil output from the USA, enabled by hydraulic fracturing techniques, boosted global oil supply over the course of the last few years.
“Everyone does whatever they want” after Friday’s decision, according to Iranian Oil Minister Bijan Namdar Zanganeh, who estimated the global surplus at as much as two million barrels a day.
“While all eyes are now on the Federal Reserve as it meets next week for the last policy meeting this year to decide whether to raise its benchmark rate, economic data from China will set the tone of prices in the coming weeks”, Mr Gupta said. Most stocks pared earlier losses. The United States Oil Fund, which tracks WTI futures, lost 4.37%, while Brent-tracking United States Brent Oil Fund, LP (NYSEARCA:BNO), lost 4.54% during the week. “It’s adding pressure to oil prices”.
However, Saudi Arabia and its Gulf allies within OPEC have been more interested in protecting their market share from the challenge posed by U.S. shale oil.
“They are ready to continue extracting the maximum oil volume and are ready for a price of $40 and even less per barrel”, he said.
If CPC implements the expected price adjustments next week, prices at the pump will stand at NT$19.4 per liter for super diesel, NT$21.7 per liter for 92 octane unleaded gasoline, NT$23.2 per liter for 95 octane unleaded and NT$25.2 per liter for 98 octane unleaded, according to the sources.
While lower prices eat into the revenues of the oil cartel’s members, cheap crude may result in lower output from non-OPEC nations – helping countries like Saudi Arabia preserve their market share.
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Analysts at Commerzbank said any recovery in prices would be dictated not by OPEC but by rising demand and a fall in production outside of the group. 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. OPEC is hoping that lower prices will drive out high-cost producers, like shale farms in the U.S.
