Oil drops after Opec maintains output despite oversupply

The group established a record high production cap of 31.5 million barrels per day, which effectively endorsed current levels that were already in excess of the previous limit.

OPEC’s decision has completely erased yesterday’s gains for WTI futures, which were largely bolstered by rumors of the group’s largest crude oil exporter, Saudi Arabia, to propose a production cut at the meeting. “Everyone is concerned about… the prices, no one is happy”, said Iraq’s oil minister Adil Abd Al Mahdi.

The Organization of Petroleum Exporting Countries also approved Indonesia’s resumption of full membership in the organization, following a request in September 2015 by the country. “Iran expects to put at least 500,000 barrels a day back into worldwide markets next year, when the United States and other western powers are expected to lift oil sanctions against the Islamic Republic”.

Brent crude oil futures were last up 65 cents at $44.49 a barrel at 1100 GMT (4:30 p.m.in India), having fallen earlier this week to a low of $42.43, within cents of August’s six-and-a-half-year trough.

Despite many member countries plan to lower the production ceiling, Saudi Arabia has demanded reduction in Russia’s production as a prerequisite for decreasing its production, a request which Russian Federation would not concur with.

The official ceiling remains 30 million barrels a day, but for more than a year now there has been overproduction ranging from just over a million barrels a day to almost twice that much.

The cartel’s Secretary-General Abdullah al-Badri said during the Friday press conference in Vienna that OPEC will wait to decide on a quota until Iran’s return to the oil market.

Following the decision, concerns about the supply glut, which have plagued the market and caused prices to fall since June past year, have increased.

“The heavy pressure on non-OPEC producers, especially USA shale, is going to be kept up”, said Paul Horsnell, head of commodities research at Standard Chartered.

“The current indecisive approach of OPEC in Vienna has shown that the oil cartel is not a single block”, Cyril Widdershoven, a senior vice president at MEA Risks LLC in the U.S, said.

“While oil advanced (Friday)… there is really nothing much to cheer about”, said Bernard Aw, market strategist at IG Markets in Singapore. While that country’s production goes mostly for domestic consumption, the move could add to the total amount of OPEC barrels on sale.