OPEC is winning: Other oil producers are cutting back

Analysts told Reuters in the wake of the IEA report that although they remained unlikely, prices as low as $20 couldn’t be ruled out completely.

Opec warned that its “oil demand forecast for 2016 is subject to considerable uncertainties, depending on the pace of economic growth, development of oil prices, and weather conditions, as well as the impact of substitution and energy policy changes”.

On the New York Mercantile Exchange, WTI crude for January delivery traded between $35.39 and $36.84 a barrel, before settling at $35.62, down 1.14 or 3.11% on the session.

“This downward trend should accelerate in coming months, given various factors, mainly low oil prices and lower drilling activities, ” Opec said.

“Concerns about reaching storage capacity limits appear to be overblown”, it said.

The growth in the world’s demand for oil is set to slow next year amid an “unrelenting” oversupply of crude, according to the International Energy Agency (IEA), in a report that could pile more pressure on already tumbling oil prices.

Opec producers pumped more oil in November than in any month since late 2008, nearly 32 million barrels per day.

OPEC Basket Oil Price stood at $34.80 per barrel on Dec.9, plunging to its lowest level since December 29, 2008.

Supply outside OPEC is expected to decline by 380,000 barrels per day (bpd) in 2016, the report said, as output falls in regions such as the United States and former Soviet Union.

Chevron Corp., the second-biggest USA oil company, said this week its 2016 budget will be 24 percent smaller than this year’s plan.

The IEA noted that “there is evidence the Saudi-led strategy is starting to work”. “Early indicators for the fourth quarter of 2015 show growth easing to 1.3 million bpd year-on-year from a third quarter peak of 2.2 million bpd”, it said.

OPEC last week was divided over whether to agree a production ceiling.

“We are in favor of, not a cut, but of countries not increasing their output, so that demand, which is growing year-by-year, is covered by the oversupply that exists in the market”, Novak said, according to a report by the Prime news agency. The sharp drop in oil prices specifically added to U.S. investor uncertainty as the Fed Reserve prepares to raise interest rates for the first time since June 2006 at its meeting next week.

Oil services firm Baker Hughes (N:BHI) said Friday that USA oil rigs fell by 21 to 524 for the week ending on December 4.

Crude prices have been in near free-fall the past week after the Organisation of the Petroleum Exporting Countries’ meeting on December 4 failed to impose a ceiling on output, virtually abandoning price support for the market. For 2016, it expects consumption to grow by 1.2-million barrels a day, not almost enough to sop up the excess in production and reduce inventories.