Oil Prices Drop After OPEC Decides to Maintain Production Levels

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.

The Organization of Petroleum Exporting Countries sent crude prices reeling a year ago when it chose to maintain output as it sought to force higher-cost producers to scale back their operations in an oversupplied market. The target heading into the meeting was 30 million barrels per day.

Iran, which plans to increase shipments once worldwide sanctions over its nuclear program are lifted, said it’s only willing to discuss curbs on output after its production reaches 4 million barrels a day, more than 1 million above current levels.

“We will have to accommodate Iran one way or the other”. Russia, Mexico and other big producers outside of the group have given no indication they would agree to any OPEC-led supply cuts.

Emmanuel Ibe Kachikwu, left, Nigeria’s oil minister and OPEC president, and OPEC Secretary General Abdullah al-Badri arrive for a news conference after a meeting of OPEC oil ministers in Vienna, Austria, on Friday.

To the minister, as far as supply is concerned, non-OPEC countries would continue to see significant reduced production growth as compared to past years, noting: “In fact, in 2016, we anticipate a contraction in non-OPEC oil supply”.

“The current actual production is above 30mbpd, and we decided reducing that would not have much affect on the market”, Kachikwu said.

But, breaking from recent practice, it published no figures on output in its post-meeting statement, and put off a production reassessment to its next meeting on Jun 2, 2016.

The West Texas Intermediate for January delivery moved down $1.11 to settle at $39.97 a barrel on the New York Mercantile Exchange.

The agreement to keep output near record highs was largely expected, but wiped out any remaining hope for bulls that production cuts could push prices higher, sending ripples across wider markets. The number of active oil rigs in the USA fell to 545, the least in five years, Baker Hughes Inc. said on its website Friday.

The group, however, has been producing almost a million more barrels than its ceiling for the past 16 months.

The ministers agreed to readmit past member Indonesia, to expand their ranks to 13.

“At an informal meeting attended by OPEC members on Thursday, Saudi Arabia is adamant that any output cuts by the group needs to be accompanied by non-OPEC producers such as Russian Federation”, he said. “Even if the prices rebound though, there will still be layoffs”, he said.

Senior oil official Amir Hossein Zamaninia said last week Iran hopes to bring an extra 500,000 barrels on the market by early next year.

“Prices have gone down too much”, said Vice Prime Minister Abdourhman Ataher Al-Ahirish of strife-torn Libya, where GDP is expected to shrink more than 6 percent this year.