Oil settles below $40 as OPEC keeps pumping despite glut

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.

Zanganeh said Iran isn’t considering a 0.5 mbpd output increase, noting that his country is going to step up production by only one mbpd, even if other OPEC members decrease their output, the Fars news agency reported December 4.

On the New York Mercantile Exchange, January West Texas Intermediate crude dropped $1.11, or 2.7%, to finish at $39.97 a barrel, after touching a $39.60 low.

Saudi Arabia’s oil minister Ali al-Naimi rebuffed the report Friday, saying that while Saudi was ready to cooperate with “anyone who helps balance the market” the report of a cut was “baseless”, Reuters reported.

Nymex reformulated gasoline futures for January deliver fell 1.72 cents, or 1.3%, to $1.2791 a gallon.

Historically low oil prices have OPEC so divided that marathon talks in Vienna that closed Friday could only produce one thing: disagreement. Consequently, global oil prices have been falling, hitting a six-year low recently.

Iran Oil Minister Bijan Zangeneh said that the members at the meeting may stick with a policy of maintaining output unchecked, which is in line with market expectations.

Demand from emerging markets like China is down, and with production still so high there’s a global glut of oil.

Indonesia’s re-entry “would simply acknowledge the reclassification of Indonesian output from non-OPEC to OPEC production, it would not amount to an increase in overall global supply”, said Julian Jessop, analyst at Capital Economics research group.

Saudi Arabia, OPEC’s biggest producer and architect of the current policy, has remained opposed to a production cut.

Naeem Aslam, chief market analyst at AvaTrade, said the danger now is that OPEC members will continue to boost production on their own in a bid to maintain market share.

For its part, Iran has repeatedly said it would add 1 million barrels of oil to the market each day when economic penalties are lifted.

But Moscow repeated this week it saw no chance of joint actions and Iran and Iraq on Friday showed no willingness to curb supply either.

“In 2015, we have seen positive examples between OPEC and Non-OPEC countries and the Asian Ministerial Energy Roundtable held in Qatar in November”.

Although OPEC’s previous official output ceiling was 30 million bpd, it is already pumping more than that.