OPEC won’t cut oil output, says Kachikwu

Oil prices fell sharply lower this afternoon, after a report suggested that the Organisation of Petroleum Exporting Countries (Opec) decided not to cut production at its meeting in Vienna.

The increase from a previous target of 30 million barrels doesn’t include production from Indonesia, which joined the group after a break of nearly seven years, according to a delegate with knowledge of the matter, who asked not to be identified because the decision hasn’t been made public.

Opec members failed to agree an oil production ceiling on Friday at a meeting that ended in acrimony, after Iran said it would not consider any production curbs until it restored output scaled back for years under western sanctions.

In New York, West Texas Intermediate crude futures fell by as much as 2% and below $40 per barrel, to as low as $39.66.

OPEC kingpin Saudi Arabia and other Gulf state members are defying calls to cut output despite tumbling prices in a bid to preserve market share and fend off competition from North American shale oil.

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.

“The market did not take the announcement out of OPEC very well today as OPEC appears to really be in disarray among its members and they took the path of least resistance, which was to do nothing and wait to see if things get better”, said Andy Lipow of Lipow Oil Associates.

The goal would be to reduce the glut of oil on the global market and keep prices from plunging further.

The cartel is expected to continue with its policy of pumping flat out, even though prices for Brent crude LCOF6, +1.23%, the worldwide benchmark, have fallen to less than $45 a barrel compared with highs of $114 a barrel past year.

At the time, Saudi Arabian Oil Minister Ali al-Naimi said he personally had had one of his worst-ever meetings.

Surging oil production from non-OPEC nations like the US has created a deep divide inside OPEC.

“Global economic growth could prevent the conflict to blow up OPEC, if demand is strong enough to give Iran some leeway inside the cartel”, Widdershoven said.

Global oil stockpiles have risen to record levels as Saudi Arabia, Russia and Iraq boosted supply, the IEA said on November 13. But conference president Emmanuel Ibe Kachikwu told reporters that there was agreement to maintain “current actual production”, which is well above the formal ceiling set at 30 million barrels a day.