It has been estimated that members subsequently lost some $500 billion in revenue, and OPEC’s policy continues to hurt oil producers worldwide as well as investors in oil companies.
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In addition, Iran is eager to alleviate the impact of long-standing worldwide isolation and current low prices with a production increase of 1 million b/d in the next six months.
“OPEC has been extremely explicit that it will not cut production in the face of low prices, and with Iran coming back to the market, it will produce more than 32 million barrels per day”, said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo. Production has begun to decline, but in order to make a serious dent in US production OPEC might need to absorb another $500 billion hit.
Data from the US Department of Energy released yesterday showed the country’s commercial crude supplies rose by 1.0 million barrels for the week ending November 20. Inventories of gasoline are well-above their average and diesel fuels are also well-supplied.
The US benchmark for crude oil, West Texas Intermediate (WTI), was down 3.09% at $41.71 per barrel, while the global benchmark for crude oil, Brent Crude, was down 1.32% at $44.86 per barrel. In tightly-supplied markets, when crude oil prices are strong, that spread value is the complete opposite. The situation was compounded by the downing of a Russian military jet by Turkey near its border with Syria. How Russia responds could plunge the region into deeper turmoil, putting a great deal of oil infrastructure and supply in the cross hairs.
Russian Energy Minister Alexander Novak said on Thursday that Russia and Saudi Arabia would set up a special joint working group on oil and gas cooperation to promote energy dialogue between the world’s top oil producers. With the OPEC meeting looming next week, the comments were seized upon. “That means that within the OPEC dynamics it’s not really adding to the competition but taking some away from it”. The Saudis are set to hold their ground. The increase in volumes would exacerbate a global glut and benefit the biggest oil- consuming region’s refiners, which are seeking cheaper sources of crude. While Saudi Arabia isn’t immune to the crisis, which has forced it to burn through currency reserves and tap bond markets to plug a 20% budget deficit, the kingdom still has enough financial firepower to see the strategy through. But, once the holidays pass, that demand will drop off, too.
“If Osborne sticks to his guns the pound may well remain under downward pressure over the near-term”.
Prices of metals such as zinc and copper resumed their recent downtrend as the dollar rallied.
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With the oil prices predicted to maintain these sufficiently high levels from late 2010 to mid 2014, the use of fracking became widespread in the USA, sparking an energy revolution.
