Oil output to stay high as OPEC fails to agree ceiling

The increase from a previous target of 30 million barrels doesn’t include production from Indonesia, which joined the group after a break of nearly seven years, according to a delegate with knowledge of the matter, who asked not to be identified because the decision hasn’t been made public. That was unlikely to happen. On the demand side, China is likely to double its strategic crude oil purchases next year to take advantage of a more than a 60 percent fall in oil prices since June 2014.

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.

The Organization of the Petroleum Exporting Countries on Friday elected to maintain current oil production levels despite apparent disagreement among members about the strategy.

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.

The dollar rose, which would ordinarily depress oil prices as this strength can encourage non-US investors in crude to sell their holdings in exchange for a higher profit in their own currency. And if a Saudi-led production cut occurred without non-OPEC- member countries reducing their production, even many OPEC countries believe it might not give prices a lasting lift, meaning Saudi would gain nothing even while creating an opening for Iran to boost sales. How production outside the cartel responds to prices over the next six months is also under consideration.

Paris // Opec will not risk its market share and further disruption to oil markets, an analyst said after it maintained output despite a 35 per cent slump in crude prices this year. The cartel accounts for about a third of world oil output and does not include Russian Federation or the United States, which rival Saudi Arabia as the world s biggest producers. “Americans don’t have any ceiling, Russians don’t have any ceiling, why should OPEC have a ceiling?”

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

“I don’t see how anybody in their right mind thought that the Saudis were going to cut production”, said Mike Breard, oil company analyst at Hodges Capital Management in Dallas. Cheap oil has helped push the average price of gas down to $2.05 in the USA, according to AAA.

Surging oil production from non-OPEC nations like the US has created a deep divide inside OPEC. Brent futures climbed 1.5 percent at $44.50 as of 10:40 a.m.in London on Friday. “At this rate of overproduction we will run out of onshore storage in the first quarter”, said Gary Ross, a veteran Opec watcher and the founder of PIRA think-tank.