OPEC members argue over production cuts

OPEC is widely expected to leave its target unchanged at December 4th meeting. Few on the market expect OPEC to change tactics despite the continuing global oversupply of crude.

“There is some probability that OPEC might in fact announce an increase in its quota by a million barrels a day to accommodate the re-entry of Indonesia as a member”, Vyanne Lai of National Australia Bank said. The U.S. benchmark crude traded at a $3.04 discount to Brent.

“It seems that the level of shale oil hasn’t decreased but it hasn’t increased significantly”, said Zanganeh.

The re-entry of Indonesia into OPEC, after a seven-year break, and Iran’s plans to ramp up output as soon as Western sanctions on the country are lifted, will have a bigger influence on outlook, analysts said. In the USA, it would be illegal for oil producers to cooperate on production cuts. The Obama administration this week signaled sanctions could be lifted on Iran as early as January.

“Production in the USA was growing over 1 million barrels per day per year, it was a huge growth, the largest multi-year growth of production of any country in history”, he says. Crude-oil stockpiles alone rose for the 10th week in a row, according to the EIA.

Opec sources and analysts said the Saudi proposal would be hard to agree as Iraq is struggling to balance its budget despite soaring output and Iran has long argued its market share was stolen by rivals during the years of sanctions.

Outside of OPEC, Russia alone pumped out 10.7 million barrels of oil a day in November, while on Thursday it again insisted that it would not be cutting back its own output to help the cartel. The nation will maintain output, he said.

“As we have said before, we are capable of increasing our production at least 0.5 million b/d after lifting the sanctions and very soon after this first jump we can reach 1 million b/d”, he said. That may be a high bar for a deal, since non-OPEC producers such as Russian Federation have been unwilling to coordinate production, and Iraq is producing at record levels to fill its treasury during a war against Islamic State.

Russia’s decision to hold course comes as the Saudi-led Organization of Petroleum Exporting Countries prepares to meet Friday nearly a year after it sent global crude prices reeling by choosing to defend market share rather than cut output.

Crude oil prices have dipped significantly as well, finally breaking through the $40-per-barrel barrier in the wake of the Fed’s Beige Book release.

However, the Gulf countries’ strategy has not yet paid off completely, as there is still too much oil in the market and prices remain low.

Oil product supplies are building as warmer-than-usual weather in the USA northeast, a major market for heating oil, limits demand.