Crude prices fall as OPEC fails to cut quota

The Saudis want to prevent Iran, their longtime enemy, from gaining market share or the profits that higher oil prices would deliver.

OPEC Secretary General Abdallah Salem el-Badri said that after meeting with nations outside of OPEC to gauge whether others would be willing to cut production alongside OPEC, the group “had a positive reply, but everyone is trying to digest how they can do it”.

The oil price rose on Thursday on reports that Saudi Arabia might be persuaded to cut production in 2016, but there was disagreement among OPEC members and an insistence that output could only be reduced if non-OPEC producers like Russian Federation and Mexico cut output too.

Lai also added that some of the bigger producers could be forced to cut output in response to increasing production from Iran.

At the press conference following the ministerial meeting, the President of Opec, Nigeria’s oil minister Emmanuel Ibe Kachikwu, explained the thinking behind Opec’s decision.

Failure to reduce the global oversupply could push oil prices $20 lower next year, Venezuelan Oil Minister Eulogio Del Pino warned before the OPEC meeting.

The failure to reach any agreement on curbing global production, which now exceeds global demand by about 2 million barrels a day and has left a glut of oil on world markets, put additional pressure on oil prices December 4. “We are really anxious”.

OPEC needs consensus among all its members before changing the group’s output target.

Iran, which pumped 2.8mn barrels a day last month, according to a Bloomberg Survey, plans to boost supply by 500,000 barrels a day within weeks of sanctions being lifted and by 1mn barrels months later. When the so-called production ceiling was at 30 million barrels per day, OPEC data showed that the 12-member cartel had collectively pumped out 31.57 million barrels per day in September.

Saudi Arabia said it didn’t feel obliged to cut production, which is running close to a record.

But the Saudis and their Gulf allies have been sticking to their strategy of defending market share – hoping that lower prices may ultimately drive higher cost producers such as United States shale firms out of the market.

Senior energy bankers in Houston on Friday said persistently low prices are increasingly separating USA shale companies into two camps: those that have good enough acreage and strong enough balance sheets to weather the downturn and those that will need to restructure or go into bankruptcy.

Here’s what the cartel didn’t say: OPEC production has risen from 30 million barrels a day to a de facto 31.5 million barrels, and when Iran is freed from sanctions the world should expect that number to rise further. Instead, OPEC leaders demurred at the semiannual meeting, opting to wait at least six months to update its production quota when it meets next in June. On the New York Mercantile Exchange, West Texas Intermediate futures was down 98 cents, or 2.4%, at $40.10 a barrel.