Kachikwu Predicts Crude Oil Price Rise in 2016

The Organization of Petroleum Exporting Countries (OPEC) has decided against cutting its oil output to lift prices, its president and Nigerian oil minister of state Emmanuel Ibe Kachikwu said following a meeting in Vienna yesterday.

From a forty-year peak of 9.6m bpd in mid-2015, production has fallen to 9m bpd with some shale oil producers unable to stay in business with the price of WTI crude oil struggling to stay above $40 a barrel.

Opec, whose members together pump out more than one third of world oil, is now producing above its official target of 30 million barrels per day.

OPEC’s Secretary General Abdullah al-Badri said the group was unable to agree on a production ceiling, in part because it was unclear how much oil Iran would export next year when sanctions are lifted.

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.

A statement issued by OPEC simply said member countries agreed that they “should continue to closely monitor developments in the coming months”.

During the meeting, members reviewed the oil market outlook for 2015, with global economic growth now at 3.1 per cent, while the projections for 2016 revealed demand expansion by 3.4 per cent.

USA benchmark West Texas Intermediate (WTI) for delivery in January was up 28 cents at US$41.36 and Brent crude for January was trading 26 cents higher at US$44.10 at around 0600 GMT.

Ultimately, OPEC leader Saudi Arabia decided not to answer desperate pleas from less affluent members like Nigeria and Venezuela to cut production. He said he expected OPEC to maintain production policies on Friday.

Saudi officials are keenly aware that Iran would be one of the biggest beneficiaries of a Saudi decision to withhold some of its production in an effort to push prices up. In Vienna, OPEC’s poorer members have been piling pressure on their richer counterparts led by Saudi Arabia to cut supply, but Riyadh and its allies appeared on Friday to be ready to stick to their strategy of protecting market share.

Saudi Arabia’s oil minister Ali al-Naimi (C) speaks to journalists as he attend the OPEC meeting … “At this rate of overproduction we will run out of onshore storage in the first quarter”, said Gary Ross, a veteran Opec watcher and the founder of PIRA think-tank.

It said that in the years ahead a balanced and stable market would be crucial to ensuring continued investment in the industry to meet the world’s growing energy needs.

Oil prices went down with the announcements, dropping to $39.99 per barrel in the US.

“By then they have a better feel for Iranian production; how much damage has been done to shale production; and how many offshore and oil sands projects have been delayed or scrapped”, Williams said. This would add to the global glut as the world is now already consuming up to 2 million bpd less than it is producing.