Oil prices drop as OPEC output rises; Brent below US$40

The Saudis already resisted cutbacks a year ago, a strategy calculated to put higher-cost outside competitors – like US shale oil producers – out of business.

Supply outside OPEC is expected to decline by 380,000 barrels per day (bpd) in 2016, the report said, as output falls in regions such as the United States and former Soviet Union.

OPEC said it saw production from non-member states faltering in 2016 under the strains of the current market environment.

“But OPEC showed last week it’s a paper tiger in that it won’t do anything to prevent supply growth”, said Michael Hewson, chief market strategist at CMC Markets.

With over 31 million barrels per day (bpd) pumped in November, the Organization of the Petroleum Exporting Countries (OPEC) says its output volume for that month exceeded that of any month in the past three years.

ANZ bank said on Friday that “crude oil markets will remain subdued in 2016, though prospects for a recovery look better in the second half of the year”.

Production from OPEC’s 12 members rose by 50,000 barrels a day to 31.73 million a day in November, the highest in two months, the agency said.

Iran’s leaders have said they plan to bring 500,000 bpd to markets as soon as possible, and they anticipate reaching 1 million bpd. Shares in the US rebounded from one-month lows, though gains were limited amid a lack of positive catalysts and as oil resumed falling.

Crude prices remained at levels not seen since 2009 in early Asian trading on Friday as oil output in the Middle East continued to rise despite an existing global glut.

The decision effectively leaves it up to individual members how much crude to pump and was a strong signal of OPEC’s eroding ability to act as a group in efforts to influence supply, demand – and prices.

Whilst oil’s 2015 hasn’t been quite as disastrous as many feared at the start of the year (although it came close), ending it by tickling fresh 7 year lows is hardly a triumph either. The cartel has tweaked its oil demand growth expectations up slightly this year to 1.53 million barrels per day, an increase of 30 kbd from last month, led by adjustments to European and Asian demand.

But by the end of 2014, US crude oil proved reserves amounted to 39.9 billion barrels-an increase of 3.4 billion barrels from 2013, and up nearly 11 billion barrels from the date of Obama’s speech.

Oil prices have tumbled to near-seven-year lows below $40 per barrel in December after OPEC failed to impose a ceiling on its output. Forecast production begins increasing in late 2016, returning to an average of 8.7 million b/d in the fourth quarter.

WTI CLc1 finished the session down 40 cents at $36.76.