OPEC Fails To Agree Production Ceiling After Iran Pledges To Boost Output

From a forty-year peak of 9.6m bpd in mid-2015, production has fallen to 9m bpd with some shale oil producers unable to stay in business with the price of WTI crude oil struggling to stay above $40 a barrel. The move helped to send Brent crude, the global benchmark, down to $42 a barrel from near $100.

The cartel published no figures on output in its communique, as it awaits increased output from Iran after sanctions were lifted on the Islamic republic.

Meanwhile, the General Director of OPEC Affairs in Iran’s Oil Ministry Mehdi Asali had announced the possibility of change in OPEC’s quota system by joining Indonesia at Friday’s meeting stressing that Iran would not vote for Saudi candidate in electing the new secretary general of OPEC.

USA crude was trading down 96 cents, or 2.3 percent, at $40.12 per barrel. Russia, Mexico and other big producers outside of the group have given no indication they would agree to any OPEC-led supply cuts. The glut – combined with the slowdown in many emerging markets and China in particular – has kept oil below $50 a barrel for much of this year.

Saudi Arabia yesterday repeated the kingdom’s stance that it would be willing to cut as long as non-Opec also reduces its output.

Tim Rezvan, an oil analyst with Sterne Agee CRT, said OPEC’s decision heralds a “bearish near-term event” for the US oil industry.

Oil dropped after OPEC signaled it would maintain current production levels that are near records.

It appeared for a while OPEC would raise its current 30 million barrels per day (bpd) cap on production, but negotiations broke down after Iran said it would not accept any limits until it emerges from Western-imposed sanctions.

Arriving for Friday’s meeting, Iranian oil minister Bijan Namdar Zanganeh said Iran is ready to discuss a ceiling for its production – but only after his country makes a “full return to the market”. See: OPEC feels pain of oil rout as it squeezes shale producers.

Most analysts weren’t expecting a production cut by OPEC, despite Saudi Arabia’s softer stance in the days leading up to the meeting.

But Moscow repeated this week it saw no chance of joint actions, and Iran and Iraq on Friday showed no willingness to curb supply either.

Saudi Arabia has lowered its oil prices in Europe, going after Russia’s market share in Sweden and Poland.

Marathon Oil Corp, Hess Corp and Occidental Petroleum Corp each fell more than 2 percent.

For while much has been made of the “breakeven” cost of oil production over the a year ago, it is the “cash cost” which determines the actual floor for oil producers.

But Thursday’s 2-percent slide in the greenback, triggered by a surging euro, left the dollar near its weakest in a month, ahead of the monthly U.S. jobs report that could cement expectations for the first United States rate rise in almost a decade from the Federal Reserve this month. In 2015, we have seen positive examples between OPEC and Non-OPEC countries and the Asian Ministerial Energy Roundtable held in Qatar in November. The two had last cooperated nearly 15 years ago to cut output and prop up the prices following the 1998 financial crisis.