Oil Prices Twitchy Before OPEC Meeting

The OPEC meeting broke up without agreement after two days of discussions about the cartel’s production ceiling.

“We can not put a number now because Iran is coming, we don’t know when Iran will come, and we will have to accommodate Iran one way or the other”, said OPEC Secretary General Abdullah el-Badri.

Goldman Sachs analysts, which expect OPEC production to remain slightly above current output at 31.8 million barrels per day in 2016, said on Friday that the supply overhang and low prices could continue until the fourth quarter of next year, in part due to robust supply.

This would normally prompt Opec to cut production to decrease supply and increase prices. Brent fell 2.3 percent to $42.84 a barrel at 3:09 p.m. London time Thursday, while West Texas Intermediate crude dropped 3 percent to $39.83.

Iraq is also resurgent.

Iranian oil minister Bijan Zangeneh said Tehran would be prepared to discuss OPEC quotas or other action only when his country reached pre-sanction oil output levels when and if Western sanctions on the country are lifted next year.

That is essentially an acknowledgement that countries are pumping more oil than they are supposed to.

“The logic is simple”, he said, of OPEC’s present clout in a market where non-members such as Russian Federation and US shale producers play an increasingly large role.

The movement came as a Reuters report suggested that the Organization of Petroleum Exporting Countries (OPEC) had decided against supporting falling crude oil prices, when representatives met in Vienna today.

However, with Russian Federation now trying to snatch a bigger share of the market from OPEC by drilling more oil, chances of that are not high. When the so-called production ceiling was at 30 million barrels per day, OPEC data showed that the 12-member cartel had collectively pumped out 31.57 million barrels per day in September.

USA crude futures for January delivery were last at $41.70 a barrel, up 1.50% for the day. Traders believe that once Iran comes back online, crude prices could plunge further. The market is oversupplied by as much as 2 million barrels a day, Zanganeh said this week, equivalent to about 2 percent of global output.

Last year, OPEC nations accelerated production in an effort to protect its market share from fracking operations in North America. The release also had a few words to say about oil.

The strategy appears to have worked with many US producers closing rigs, canceling projects and lowering production.