7 December, AtoZForex.com, Lagos – The OPEC meeting ends in stalemate, reflecting the internal fracas within the Organization of Petroleum Exporting Countries (OPEC). The internal rumbling is developing into an issue, aside the already existing serious problems of OPEC with the US shale producers. In fact, the initial case against US shale producers drove the cartel to pump excessive volumes of oil into the markets.
Iran pledges extreme production
The cartel is responsible for about a third of the world’s entire oil output, but it failed to reach a consensus on Friday, as the OPEC meeting ends in stalemate. No oil production ceiling was set as the meeting ended in chaos with Iran, saying it will produce as much oil as possible until it restores output scaled back for years under Western sanctions, adding more pressure in the already oversupplied market. Brent oil futures fell by 1 percent on Friday to trade around $43, close to a six year low region.
Due to the lingering over-saturation in the market, oil prices have more than halved over the past 18 months to a fraction of what most OPEC members need to balance their budgets. The situation seems dire, with the likes of Goldman Sachs predicting a price fall as low as $20 per barrel as the world produces more oil than it consumes and running out of capacity to store the excess.
Secretary general of OPEC Abdullah Al-Badri said the group could not settle on any specific figures for oil production cap due to the unpredictable case of Iran’s renewed input. The country enters the market fully after sanctions have been withdrawn under a deal reached six months ago with world powers over its nuclear program.
Saudi Arabia is being looked upon by smaller nations as somewhat of a bully. This time last year, Saudi influenced members to continue to pump unrelenting output into the markets in a bid to defend market, hence leading to an oil glut which has caused prices to crash. The effort was meant to frustrate high-cost producers such as U.S. shale firms out of the market. Smaller members of the group have said they were more or less bullied into this decision, therefore prompting the Saudi oil minister, Ali al-Naimi, to say he would listen to everyone this time.
In conclusion, OPEC sources clarified to Reuters that at the start of the meeting, the ministers had agreed on a rollover of an existing policy which involved raising the collective ceiling, excluding new member Indonesia, to 31.5 million bpd from the previous 30 million – effectively bringing it in line with real production numbers. However, these decisions appeared to have been abandoned, as the OPEC meeting ends in stalemate. Due to the abandoning of these decisions, the cartel is again without an official policy stance.
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