OPEC’s Failure To Reduce Oil Output To Keep US Gas …

During a long day – Friday’s 168th ministerial meeting was the longest for many years – very strong rumours emerged that Opec meant to increase its 30m bpd production ceiling to 31.5m bpd to effectively formalise the production that now exceeds it. These rumours turned out to be false and instead Opecc stunned the press room with its decision to dispense with an official production ceiling. We believe, however, that there are high risks that this may prove too slow an adjustment as inventories continue to accumulate and storage utilization nears high levels in the face of a mild winter, slowing EM growth and a potential lift of worldwide Iranian sanctions.

In a statement by the organisation, registering the resumption of Indonesian as an OPEC member, the oil cartel declared the new holders of other offices.

Banks such as Goldman Sachs predict they could fall further to as low as $20 per barrel as the world produces more oil than it consumes and runs out of capacity to store the excess.

OPEC said Friday that it would “continue to closely monitor developments in the coming months”, but won’t deviate from its current production around 31.5 million barrels a day.

Following a meeting of the cartel in Vienna, OPEC president and Nigerian oil minister Emmanuel Ibe Kachikwu said a reduction “is not going to make much of an impact in the market”. “The burden to adjust supply remains on non-OPEC producers”.

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 US$40 a barrel.

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

Paris // Opec will not risk its market share and further disruption to oil markets, an analyst said after it maintained output despite a 35 per cent slump in crude prices this year.

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.

The hands-off decision pushed USA oil back below US$40 a barrel, after closing at the level Wednesday for the first time since August.

“Dialogue and collaboration with consumers, non-OPEC producers, oil companies and investors are essential in reaching our common goal of a more orderly oil market”.

Most ministers left the meeting without making a comment. The group accounts for about a third of world oil output and does not include Russian Federation or the U.S., which rival Saudi Arabia as the world’s biggest producers.

And the ministers agreed to readmit past member Indonesia, to expand their ranks to 13. “I think there will be a decision about how to act on the market in the second quarter of 2016”, after Iran has restored some of its oil shipments, he said. NGL Energy Partners LP was struggling to muster interest on Friday for a new high-yield bond, as investors grow skittish, prompting the issuer to offer higher interest rates, IFR reported.