Crude oil prices rise ahead of OPEC meeting in Vienna

USA benchmark West Texas Intermediate tumbled US$1.11, or 2.7 per cent, to US$39.97 a barrel on the New York Mercantile Exchange.

In the runup to the meeting, there was speculation the cartel would at least debate a production cut, though officials and analysts had largely played down talk of a move. This stubbornness is alarming to some of the weaker members of the organization, who are starting to fear the very real possibility of prices dropping as low as $20 a barrel.

It appears OPEC is hoping it can outlast other major producers such as Russian Federation and the United States, forcing them to cut output instead while OPEC produces more oil and hopes for a higher price. However, there will be an expert-level discussion between Russian Federation and OPEC in mid-December, where the possibility might come up.

The meeting was held to explore ways of lifting languishing prices and turning the global oil market around.

OPEC said Friday that it would “continue to closely monitor developments in the coming months”, but won’t deviate from its current production around 31.5 million barrels a day.

Earlier, sources said OPEC had stuck with its policy of producing near-record volumes of oil, taking no measures to reduce one of the worst crude gluts in history which has driven down prices, Reuters reported.

Iraq’s oil minister Adil Abd Al-Mahdi told reporters in Vienna that nothing had been decided yet during the informal gathering ahead of Friday’s meeting in Vienna.

Opec secretary general Abdullah Al Badri said the body could not agree on any figures because it could not predict how much oil Iran would add to the market next year. Consequently, global oil prices have been falling, hitting a six-year low recently. The group is producing above its current ceiling, and the return of Indonesia to the cartel plus a ramp up of production in Iran is making it look even less meaningful. The market is oversupplied by as much as 2 million barrels a day, Zanganeh said.

Here’s what the cartel didn’t say: OPEC production has risen from 30 million barrels a day to a de facto 31.5 million barrels, and when Iran is freed from sanctions the world should expect that number to rise further.

The Saudis and other OPEC states are looking to maintain their market share at a time when low prices are already cutting into their revenues.

“The difference is that everyone wants somebody else to cut”, said Jamie Webster, Senior Director of Oil Markets at IHS.

OPEC’s policy is squeezing incomes for its members, whose combined annual revenue could fall to $550 billion from an average of more than $1 trillion in the past five years, the International Energy Agency said November 10.