OPEC policy risks further oil price pressure

AFP, VIENNA: OPEC’s policy of maintaining high oil production risks heaping more downward pressure on oil prices, especially with Iranian crude set to enter the global marketplace, analysts say.
While lower prices eat into the revenues of the oil cartel’s members, cheap crude may result in lower production from non-OPEC nations—helping countries like Saudi Arabia preserve their market share.
The Organization of the Petroleum Exporting Countries decided at its meeting in Vienna on Friday against cutting the cartel’s oil output despite sliding prices and ahead of higher production from Iran next year.
Going into the meeting, OPEC—whose members together pump out more than one third of world oil—has consistently struggled to keep production at a target of 30 million barrels per day.
The cartel is pumping out around 32 million barrels daily—a figure that is set to rise in coming months as Iran looks to produce more crude following the lifting of sanctions—while OPEC appears to have abandoned its target following Friday’s meeting.
Despite oil prices plunging by more than 60 per cent in 18 months, OPEC kingpin Saudi Arabia and the cartel’s other Gulf state members are defying calls to reduce output, which has been a year-long strategy of attempting to preserve market share and fend off competition from non-OPEC and world-leading producers Russia and the United States.
In June last year, crude had traded above $100 a barrel, but has since plunged on a global supply glut, weak demand growth and a strong dollar.
High supplies are largely due to the arrival on markets of oil extracted from North American shale rock.
However, while oil prices remain above the current $40-a-barrel level on world markets, investment in US production is expected to stay resilient.
It is when oil goes under this level for a sustained period of time that new investment in shale production risks dropping off, according to Natixis bank analyst Abhishek Deshpande.
OPEC’s policy of “keeping high production and keeping prices under pressure has taken more time” than it would have expected, he told AFP on the sidelines of the Vienna gathering.
Iran’s Oil Minister Bijan Zanganeh meanwhile noted that while the level of shale oil production hasn’t decreased due to OPEC policy, neither has it “increased significantly”.

OPEC policy risks further oil price pressure

AFP, VIENNA: OPECs policy of maintaining high oil production risks heaping more downward pressure on oil prices, especially with Iranian crude set to enter the global marketplace, analysts say. While lower prices eat into the revenues of the oil cartels members, cheap crude may result in lower production from non-OPEC nationshelping countries like Saudi Arabia preserve their market share. The Organization of the Petroleum Exporting Countries decided at its meeting in Vienna on Friday against cutting the cartels oil output despite sliding prices and ahead of higher production from Iran next year. Going into the meeting, OPECwhose members together pump out more than one third of world oilhas consistently struggled to keep production at a target of 30 million barrels per day. The cartel is pumping out around 32 million barrels dailya figure that is set to rise in coming months as Iran looks to produce more crude following the lifting of sanctionswhile OPEC appears to have abandoned its target following Fridays meeting. Despite oil prices plunging by more than 60 per cent in 18 months, OPEC kingpin Saudi Arabia and the cartels other Gulf state members are defying calls to reduce output, which has been a year-long strategy of attempting to preserve market share and fend off competition from non-OPEC and world-leading producers Russia and the United States. In June last year, crude had traded above $100 a barrel, but has since plunged on a global supply glut, weak demand growth and a strong dollar. High supplies are largely due to the arrival on markets of oil extracted from North American shale rock. However, while oil prices remain above the current $40-a-barrel level on world markets, investment in US production is expected to stay resilient. It is when oil goes under this level for a sustained period of time that new investment in shale production risks dropping off, according to Natixis bank analyst Abhishek Deshpande. OPECs policy of keeping high production and keeping prices under pressure has taken more time than it would have expected, he told AFP on the sidelines of the Vienna gathering. Irans Oil Minister Bijan Zanganeh meanwhile noted that while the level of shale oil production hasnt decreased due to OPEC policy, neither has it increased significantly.