OPEC to meet under cloud of global oil supply glut
Print Edition
OPEC gathers in Vienna this week to decide on whether to trim the cartel’s oil output faced with a global supply glut, sliding prices and weak demand growth.
Alongside a formal decision on production due tomorrow, the Organization of the Petroleum Exporting Countries is set to approve Indonesia’s return as a member.
Analysts expect OPEC — whose 12 member nations from the Middle East, Africa and Latin America pump out about one third of the world’s oil — to leave its daily oil output target at 30 million barrels.
Nevertheless, it may agree to trim excess production in a bid to support prices and in turn producers’ revenues.
According to a survey by Bloomberg News, OPEC production in November rose to 32.12 million barrels per day.
“We will discuss ... and then decide” on output, Saudi Arabia’s oil minister Ali al-Naimi said on arrival in the Austrian capital, home to OPEC’s headquarters.
At its last regular meeting in June, OPEC defied calls to cut output despite the low oil price, extending what is now a yearlong strategy of trying to keep market share and fend off competition from oil extracted from North American shale rock.
A world leader in crude oil production along with non-OPEC countries Russia and the United States, Saudi Arabia holds significant influence over the cartel’s other 11 members.
But the policy of maintaining high output has contributed to prices slumping from above US$100 a barrel in mid-2014 to US$40-45 currently.
This has caused friction within OPEC, with poorer members such as Venezuela suffering badly from a fall in income.
Oil prices fell yesterday on expectations the cartel would maintain output levels.
“The pressure is growing on Saudi Arabia to cut production after it convinced the cartel to keep oil output high in order to maintain market share and presumably squeeze shale and other weaker producers out of the market,” noted Fawad Razaqzada, oil market analyst at Gain Capital trading group.
“That strategy has so far failed to work effectively with rivals proving to be surprisingly resilient and shale output has fallen only slightly. Meanwhile oil prices have dropped far more, and remained depressed longer, than what the Saudis and indeed many other oil producers had envisaged,” he added.
The price situation could worsen next year when growth in global demand for crude is set to slow, the International Energy Agency said last month.
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