Bitterly divided OPEC fails to reach oil output decision

Iraq’s Minister of Oil Adil Abd Al-Mahdi speaks to journalists prior to the start of a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Friday, Dec. 4, 2015.

If prices recover sharply, it could revive some US shale production, displacing OPEC crude.

In the meantime, this is no consolation to those members of Opec who have been particularly badly affected by the collapse in crude oil prices from $115 a barrel in June 2014 to close to $40 a barrel today. “They want to see non-Opec countries cut supply before they take action”.

“We chose to postpone this decision until the next OPEC meeting, when the picture will be more clear”, OPEC Secretary-General Abdalla Salem el-Badri of Libya told reporters, according to CNN.

Worldwide oil traders say rising stockpiles will continue to weigh on the oil market and prices may not rally in the next two years.

Addressing delegates earlier, Kachikwu projected that demand for OPEC crude would rise by 1.2 million barrels per day to average 30.8 million barrels per day for the year 2016 leading to a more balanced market.

Cheap oil that could get even cheaper: That’s the challenge OPEC ministers face as they try to cut their losses at a time when supply is outstripping demand. Instead, the organization’s endorsement of present output, which is more than 1.5 million barrels a day above the formal ceiling of 30 million barrels, is likely to push the price of oil down further.

Given that need, some in the USA oil industry had held out hope that OEPC would actually lower its production at Friday’s meeting, an expectation that now seems misguided as Saudi Arabia, the group’s de facto leader, has aggressively pursued a strategy of high production in order to rattle US rivals.

Energy Intelligence had reported on Thursday Saudi Arabia was prepared to support a cut of 1 million bpd by OPEC if Iraq agreed to freeze output, Iran contributed and non OPEC members joined the cuts too.

OPEC nations are faced with a massive surplus of oil, sending prices plunging more than 60 percent in the last 1½ years. “The higher quota reflects the realpolitik of accommodating Iran”.

A final statement was issued with no mention of a new production ceiling, apparently allowing member countries to continue pumping oil at current rates into a market that has been oversupplied.

By 1330 GMT, the ministerial meeting behind closed doors had been in progress for almost three hours.

Opec yesterday confirmed that Indonesia had returned to the cartel after a near seven-year absence, bringing the number of member countries to 13. But cutting production levels might not give a lasting boost, with non-OPEC countries like Russian Federation and the United States still going strong.

Still, the move wasn’t entirely unexpected, and Friday’s 2.4 percent drop in US crude prices may soon abate, analysts said.

Bullish wagers on U.S. crude oil from hedge funds and other big speculators fell to the lowest level in more than five years, data from the U.S. Commodity Futures Trading Commission (CFTC) showed.