Oil sinks as OPEC decides to not cut output

Analysts said however that the rise was likely to be short-lived as the Organization of the Petroleum Countries is expected to maintain current high output levels favoured by influential members such as Saudi Arabia and other Gulf states.

OPEC will reportedly be sticking to its plan of flooding global markets with oil. West Texas Intermediate, the US benchmark price for crude oil, lost 3 percent to open the day at $39.78 per barrel, falling below the $40 mark for the second time this week.

Production from other Middle Eastern players such as Iraq and Saudi Arabia has surged this year, keeping global oil supplies ahead of crude demand.

The world has too much oil, and OPEC is trying to keep prices low to defend its market share against rivals like the US where oil costs more to extract and refine.

“By then they have a better feel for Iranian production; how much damage has been done to shale production; and how many offshore and oil sands projects have been delayed or scrapped”, Williams said.

For its part, Iran has repeatedly said it would add 1 million barrels of oil to the market each day when economic penalties are lifted.

The 168th Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) wrapped off on Friday, 4th December, 2015, in Vienna, Austria without yielding any fruitful results. Members set aside their previous daily output target of 30 million barrels, a ceiling breached for 18 months.

Earlier reports that OPEC was to raise output sent Brent crude prices tumbling by two percent to 43 dollars a barrel.

OPEC Conference president Dr Emmanuel Ibe Kachikwu said in a statement: “World oil demand in 2015 will grow by 1.5 million barrels per day, up from one million barrels per day in 2014”.

Acknowledging their inability to push up oil prices, OPEC nations on Friday effectively scrapped their official output ceiling and agreed to keep producing well above that level.

“We have said on more than one occasion, we are willing to cooperate with anyone who can balance the market”, said Saudi Arabian oil minister Ali al-Naimi.

The news agency Reuters, citing sources at the talks, reported that the only development to arise from the meeting was to be an increase in the collective output ceiling. “According to analysts, OPEC countries which depend on oil revenues might face a hard endurance test in the event of a further decline of the oil price”.

OPEC will wait until June to decide on a new limit, Secretary General Abdalla El-Badri said.