OPEC indecision could engulf big oil majors

The 168th meeting of the Organization of the Petroleum Exporting Countries ended in Vienna, Austria, on Friday, with a resolution by members to keep production outputs unchanged in a bid to ensure long-term stable and balanced oil market for both producers and consumers. “So the bounce in crude futures is likely to be tentative”.

The Secretary General of OPEC Abdallah Salem el-Badri said it’s hard to say how much oil Tehran would add to the market in 2016, as sanctions against Iran are lifted under the deal it agreed with world major states over its nuclear plan.

The President of OPEC Conference informed that world oil demand in 2015 grew by 1.5 million barrels per day, up from 1 million barrels per day in 2014. Newsletter has been successfully subscribed.

“We expect the OPEC meeting on Thursday and Friday to be a non-event, and member countries are unlikely to agree on any production cuts”, Barclays said.

Some members are already producing beyond their quota, effectively making daily output closer to 32 million barrels. The group pumped about 31.4mn in October, according to estimates in its monthly market report.

“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.

With oil prices hovering near a six-year low, cash-strapped countries including Venezuela, Ecuador and Algeria are pressuring Saudi Arabia to cut production.

Beijing will add 70-90 million barrels of crude to storage tanks in 2016 to build up its strategic petroleum reserves (SPR), according to most respondents in a poll of five analysts and data collected by Reuters analysts.

Badri tried to lessen the embarrassment of OPEC’s divisions by saying the cartel’s influence on market prices is as strong as ever – an assertion that prompted an outburst of laughter from reporters and analysts in the conference room, Reuters reported.

The agreement to keep output near record highs was largely expected, but wiped out any remaining hope for bulls that production cuts could push prices higher, sending ripples across wider markets. “OPEC has also held bilateral dialogues with Russian Federation and China this year, and later this month the OPEC-India Energy Dialogue would have its first meeting”. “Others should do the same”, the Iraqi minister further said, referring to non-OPEC countries such as US.

Iran’s claim that it could increase production by 500,000 bpd in three months with a further 500,000 bpd to follow within a year is treated with some scepticism in view of the lack of investment in the infrastructure and the additional difficulty of marketing crude oil in a glutted market that has seen supply exceed demand by more than 1m bpd throughout 2015.

Saudi Arabia and its allies in the Persian Gulf have demanded cooperation from non-OPEC nations before agreeing to an output cut, but the new cap also acknowledged that the cartel isn’t in a position to dictate global prices.

Initially on Friday there was no indication of a repeat of the 2011 meeting, which Naimi had called the “worst ever”.

An attempt to nudge the cost of oil higher would have involved lowering output.