Iran blames Opec oversupply for low crude oil prices

Venezuela has warned of a “catastrophe” if OPEC doesn’t cut output, saying prices could tumble to $30 a barrel.

Following the OPEC decision, West Texas Intermediate (WTI) crude for January delivery closed down 2.7 percent at US$39.97 a barrel in NY overnight, and Brent, the global benchmark, dropped 1.9 percent to end at US$43 per barrel.

As a result of ongoing oversupply, analysts said that prices would fall further, with Goldman Sachs seeing a possibility of US$20 per barrel. “Why should OPEC have a ceiling?” Meanwhile, Saudi Arabia, a key member of Opec, the Organisation of the Petroleum Exporting Countries, is refusing to cut its production, meaning the market is heavily over-supplied.

Since the cartel’s last meeting in June, Iran has been demanding the organization to make room in its quota for its return to the oil market after worldwide economic sanctions on the country were lifted.

Oil supplies have outstripped demand this year as OPEC, Russia (whose oil output has risen to a post-Soviet era high in 2015) and the United States have engaged in a fierce battle for market share.

Despite fresh turmoil in the Middle East as Britain joined bombing raids on IS’s oil fields in Syria, higher production has more than offset market jitters.

The U.S. Energy Information Administration said that crude oil inventories rose by 1.2 million barrels last week, the 10th straight weekly gain.

A senior Iran oil official said that Iran wanted to bring another 500,000 barrels to market each day by early in 2016.

A spot poll of nine analysts in Vienna, Austria by Sharecast, had all opining in favour of a no-change scenario at OPEC.

“In approving Indonesia’s resumption of its full membership in the organization, the conference extended a warm welcome to its delegation, headed by HE Sudirman Said, minister of energy and mineral resources of Indonesia”, OPEC secretariat revealed. “Even if we keep cutting that doesn’t solve anything”, said OPEC President Emmanuel Ibe Kachikwu.

Futures contracts don’t reflect pure expectations of where that commodity will trade; they also reflect things like the costs of storing that commodity, the extra price that users will pay to have access to the commodity for convenience reasons, and prevailing interest rates.

OPEC sources told Reuters the ministers had agreed to roll over existing policies during the first couple of hours of deliberations.

Aligning actual production with the output ceiling and also another cut in the ceiling by one more million barrels a day, would increase oil prices by at least $8 a barrel for a new price of $48 a barrel, compared to the current prices.

Saudi Arabia, along with its allies in the Persian Gulf announced their willingness to reduce oil production if producers in Russia, Iraq and Iran will do the same.