OPEC to Decide on Oil Output

Friday’s announcement sent ripples through wider markets and dented shares of USA energy drillers already suffering from low prices, but losses in oil futures were limited as prices hit key support levels around $40 a barrel.

“We will have to accommodate Iran one way or the other”. He said he expected OPEC to maintain production policies on Friday.

And so while Goldman is forecasting oil prices over the next few months to be near $40 a barrel, or roughly where they are trading today, there could be another 50% to fall as continuing OPEC production pushes producers towards the absolute lowest level they can conceivably manage.

“We chose to postpone this decision until the next OPEC meeting when the picture will be more clear”, OPEC Secretary General Abdalla Salem El-Badri of Libya told reporters on Friday. “The generally strong dollar trend [is] just one additional bearish item that the oil complex will need to contend with” this month, said Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates. Saudi Arabia, OPEC’s biggest producer and architect of the current policy, has remained opposed to a production cut unless countries outside the group cooperate. In 2015, we have seen positive examples between OPEC and Non-OPEC countries and the Asian Ministerial Energy Roundtable held in Qatar in November.

According to secondary sources, currently, OPEC countries are producing 31.3 million barrels of crude per day which marks 1.3 million barrels more than the ceiling set for the organization.

“OPEC said it will maintain actual production levels, which is around 31.5mbpd”.

Because of overproduction chiefly by Saudi Arabia and non-OPEC producers, there is now up to 2.5 million bpd of excess oil in the market which has caused crude prices to lose around 60% of their value since mid-2014.

Shares of US shale oil producers tumbled on Friday after OPEC failed to agree on a unified output cap, effectively letting its 13 members pump at will in a step likely to further depress prices and advance the group’s aim of squeezing out USA rivals.

Iran has stated that it plans to increase oil output by at least one million bpd. The market is oversupplied by as much as 2 million barrels a day, Zanganeh said. “U.S. production is going down while Iranian production should be increasing”. Venezuela has warned of a “catastrophe” if OPEC doesn’t cut output, saying prices could tumble to $30 a barrel.

A final communique following the meeting made no reference to the idea of a production quota cut – from the cumulative 30 million barrels a day – in a bid to boost prices. Sanctions on Iranian oil sales are about to end, Indonesia is about to be reinstated as a member and Iraq’s production is coming back strongly after years of conflict.

“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.