OPEC Decision Could Hit Oil Companies Even Harder

Because of overproduction chiefly by Saudi Arabia and non-OPEC producers, there is now up to 2.5 million bpd of excess oil in the market which has caused crude prices to lose around 60% of their value since mid-2014.

The Organization of the Petroleum Exporting Countries on Friday decided against cutting its oil output despite sliding prices and higher production expected from Iran.

He said the downward trend stemmed mainly from the impact of investment cutbacks and the drop in USA tight oil output, which had been declining since May 2015.

Friday’s news pushed oil prices down, with the US benchmark rate sliding 2.7 percent on the day to $39.99.

“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”, he said at a news conference. Despite the oversupply in the global oil market, members did not agree to any supply cut at its meeting on Friday in Vienna, as the group is continuing with its Saudi-led strategy of fighting for market share, agreed upon past year, instead of throttling back to shore up prices.

OPEC’s decision to keep production at near record levels has done Britain’s oil industry in the North Sea no favours either.

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.

This despite slowing growth in global oil demand, largely because of weaker economic output in China, the world’s biggest consumer of energy.

Addressing delegates earlier, Kachikwu projected that demand for OPEC crude would rise by 1.2 million barrels per day to average 30.8 million barrels per day for the year 2016 leading to a more balanced market.

In a surprise, OPEC failed to reach an official decision Friday on how much oil to produce.

‎”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. Iran is poised to boost output after sanctions over its nuclear program are lifted and it won’t seek permission from OPEC to do so, Zanganeh said last month. “We have a responsibility to maintain our 12.5 million-barrels-a-day capacity”. It is imperative to state that an attempt to nudge the cost of oil higher would have involved production cuts.

“The Saudis are sticking to their policy”, Mike Wittner, head of oil-market research in NY at Societe Generale, said by phone.

OPEC has pumped more than its collective target of 30 million barrels a day for the past 18 months, data compiled by Bloomberg show.

Well, OPEC’s secretary general says there was no consensus on how much oil Iran will add to the market next year due to the pending lift of sanctions.

“We are looking for stability in the market”, said Venezuelan minister Eulogio Del Pino.

However, a fresh election was made on Friday at the 168th ordinary meeting of the organisation in Vienna, Austria, Kachikwu’s first meeting at the helm.