Oil rises as OPEC meets; US dollar near one-month low

Opec members failed to agree an oil production ceiling yesterday at a meeting that ended in acrimony, after Iran said it would not consider any production curbs until it restores output scaled back for years under Western sanctions.

Since the cartel’s last meeting in June, Iran has been demanding the organization to make room in its quota for its return to the oil market after global economic sanctions on the country were lifted.

As the meeting convened, conference president Emmanuel Ibe Kachikwu described the oil industry as “in the midst of another challenging cycle”.

Iraq has also vowed to boost supply in the coming year.

Iran expects the sanctions to be lifted in early next year, as it is adhering to the terms of a July nuclear deal clinched between Tehran and the world’s six major powers. “If the Iranian situation is handled poorly, and both camps (Opec and Iran) operate independently, we could see further price erosion”.

In some negative news for crude prices, it was reported today that OPEC nations made a decision to keep producing oil at the current high levels, effectively acknowledging their inability to push up crude prices.

Houston’s Fuel Fix reports that “Indonesia, which produced an estimated 789,000 barrels a day a year ago and has 3.7 billion barrels in reserve, originally joined OPEC in 1962 and left the group in 2009”.

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

Analysts said the decision shows OPEC remains determined to continue pumping aggressively, putting pressure on US shale producers and other sources of non-OPEC production in what amounts to a price war.

Poorer OPEC members such as Venezuela and Ecuador, whose economies have been hit by the plunge in prices, are demanding a cut to the cartel’s overall ceiling.

OPEC has also said that in 2016, demand for OPEC crude is expected to rise by 1.2 million barrels per day to average 30.8 million barrels per day for the year.

Cushioned by past profits on oil, the Saudis can hold out, even if production costs exceed sale revenues.

“No one wants to go first” said Ed Hirs, an energy fellow at the University of Houston.

Energy ministers attending a meeting of Oil Producing and Exporting Countries (OPEC) in Vienna have agreed to disagree.

NEW YORK – Oil prices fell on Friday after news that Organisation of the Petroleum Exporting Countries (Opec) was planning to maintain its production near record highs, despite depressed prices, as the producer group continued to seek share of an oversupplied market.