Oil cartel OPEC postpones decision on production quota

Acknowledging their inability to push up oil prices, OPEC nations on Friday effectively scrapped their official output ceiling and agreed to keep producing well above that level. In the past, the view has been that OPEC only functions by content volume, but world dynamics have changed, OPEC President Emmanuel Kachikwu of Nigeria said in a press conference following the meeting.

In a statement by the organisation, registering the resumption of Indonesian as an OPEC member, the oil cartel declared the new holders of other offices.

“We have said on more than one occasion that we are willing to cooperate with anyone that will help balance the market… with us”, Saudi oil minister Ali al-Naimi told reporters gathered at OPEC headquarters in Vienna.

While smaller OPEC members have been pressuring the larger producers to cut, Saudi Arabia appears determined to try and protect market share.

Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates. That’s because US shale-oil production is proving remarkably resilient even though the oil price has fallen by more than half since mid-2014.

Speaking before the group’s policy meeting in Vienna, he said sustainability of crude supply was more of a concern than prices.

There were rumors that Saudi Arabia floated the idea of agreeing to a production cut of 1 million barrels per day, but only if several major non-OPEC oil producers also agreed to restrict output.

OPEC expects further cooperation with other influential non-OPEC oil exporters such as Russian Federation and the United States, but added there is no sign to cut global oil output. Olivier Jakob of the Swiss oil consultancy Petromatrix estimated on Friday that Iraqi oil production surged in November to a record high of 4.6 million barrels a day, an increase of 1.4 million barrels over the same month a year ago.

“So in summary, we all must do what OPEC has done”, Larry said. Only a massive cut in output levels – something that is off the table for OPEC member countries – could increase prices substantially in the short-term.

Senior energy bankers in Houston on Friday said persistently low prices are increasingly separating USA shale companies into two camps: those that are strong enough to weather the downturn and those that will need to restructure or go into bankruptcy.

Friday’s announcement sent ripples through wider markets, but losses in oil futures were limited as prices hit key support levels around $40 a barrel.

It’s adding up to a market where oil prices aren’t sensitive to oil supply but to currency strength.

Despite repeated questioning on the quota ceiling, El-Badri said with Indonesia’s re-entry into the OPEC fold, possibility of additional Iranian barrels entering market and the evolving macroeconomic climate, putting a figure was not feasible.

Despite Zanganeh’s confidence in growing global oil demand, an internal OPEC document suggested group sees the market will remain oversupplied by 700 MBOPD in 2016, reports The Wall Street Journal. Even though Iran’s minister is calling for this, it’s even more unlikely given the meeting’s outcome.

“It is going to be 12 to 18 months before they see any relief”, David Fyfe from the oil trading group Gunvor.