No output ceiling set by OPEC

OPEC watchers said the divisions make it more likely the group will re-affirm its current production ceiling of 30 million barrels a day on Friday.

OPEC believes that output from non-member states will eventually wane in light of the low crude prices, but Friday’s decision is also meant to accommodate new production from cartel members. While overproduction hadn’t been a big secret, the ceiling raise suggested to the global oil market that even more OPEC oil can be expected. That would be close to pre-sanctions levels of around 4 million barrels.

Goldman added that OPEC commentary, “further stressed the need for the oil market to rebalance on its own (‘wait and watch’) and the organization made no comment on adhering to country level quotas”.

“One of the reasons that we did not really mention an amount is because we are looking to negotiate with non-OPEC more and see how we can reach a collective effort that all of us should contribute to the market”, he said.

OPEC is keeping the status quo and hoping the market will rebalance itself with higher demand and decreases in non-OPEC supply.

With OPEC countries producing an estimated 32 million barrels per day, above the group’s agreed 30 million barrel target, and with Iran expected to resume substantial exports next year, hopes were that the group would take steps to lower supplies. This is after commitments from companies representing $50 billion in assets in September. Still, the move wasn’t entirely unexpected, and Friday’s 2.4 percent drop in US crude prices may soon abate, analysts said. The release also had a few words to say about oil.

‎”We have said on more than one occasion, we are willing to cooperate with anyone who can balance the market”, said Saudi Arabian oil minister Ali al-Naimi. “OPEC has been producing around 31.5mbpd in the past months anyway”, he added. “Shale is the new reality”. OPEC’s next meeting is scheduled for June.

Of course, as many predicted, OPEC has failed to set any new production limits at this important meeting.

If current crude oil output were to remain unchanged, OPEC has estimated that global oversupply in 2016 should be about 700,000 b/d. Anybody will produce as much as they want.

OPEC’s decision to stand pat effectively kicks the can down the road to its next meeting.

So far it has not done that – it has put poorer OPEC members’ finances under vast pressure.

“Iran is coming but we don’t know when Iran will come”, said Mr. Badri. A year ago, Riyadh spearheaded a decision to maintain output and fight for market share rather than cut production to sustain high oil prices. Russian Energy Minister Alexander Novak said Thursday that the country doesn’t see a production cut as viable. An OPEC production cut wouldn’t get under way without Saudi Arabia’s leadership, but the Saudis are locked in a regional struggle for political influence with Iran, with both sides supporting opposing proxy forces in high-stakes wars in Syria and Yemen.