OPEC ponders strategy, but lacks options to raise oil price

SINGAPORE, Dec 4 Crude oil prices were choppy ahead of an OPEC meeting in Vienna, although traders largely expect the group to stick to its policy of maintaining high output.

In a chat with ET Now, BK Namdeo, Director – Refineries, HPCL, shares his outlook on oil in light of the crucial OPEC meet.

West Texas Intermediate oil futures extended losses on Wednesday, after data showed that oil supplies in the USA rose for the tenth consecutive week last week. The Saudis chose to keep production rates as they were even if it meant oil prices would stay low.

But Saudi Arabian officials have said they would listen to members’ concerns at the meeting but they also said have repeatedly said they will not cut production unless other producers also cut back.

Russian Federation doesn’t have the ability to adjust output like some OPEC members because of different climate conditions, Novak said.

The dollar rose, which would ordinarily depress oil prices as this strength can encourage non-U.S. investors in crude to sell their holdings in exchange for a higher profit in their own currency. (ECA – Get Report) shares are increasing on Thursday as oil prices were leaping on the weaker dollar and on reports that Saudi Arabia may take action to try and stabilize oil markets.

Pascal Menges, Portfolio Manager of LO Funds said: “Although there are many calls for a production cut, we think it is unlikely that Saudi Arabia will agree”.

The Energy Intelligence newsletter reported on Thursday that Saudi Arabia is considering proposing that the Organization of the Petroleum Exporting Countries (OPEC) cuts output next year by 1 million barrels per day (bpd) and has determined participants and volumes on which a deal would depend – a surprise move that would be the Kingdom’s first definitive proposal since prices collapsed.

“We don’t accept any discussion about the increase of Iran production after the lifting of the sanctions”, said Iran’s Oil Minister Bijan Zangeneh.

“Even if the report is credible, there will be a long way to go before the market could have any reasonable assurance that an agreement was possible and that it could be adhered to”, Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. Currently, about 0.5 to 2 million barrels of oil per day are being produced in excess of demand, which, in turn, led to a price drop of more than 60 percent since June 2014.

As the world’s oil producers gather in Vienna, they are all hurting due to prices that crashed a year ago and are hovering at a little over $40 a barrel. But as I have already said, no player is going to cut down on production.

Tehran said it could boost production by 500,000 barrels per day to 1 million barrels per day in 2016.

To make room for the return of Indonesia, OPEC could actually raise its 30 million barrel per day quota, which it has been surpassing.