Oil and gas prices will remain under pressure well into 2016 after OPEC’s final meeting for the year failed to provide any guidance – good or bad.
Despite the solid end to the week for gold, metals and other commodities, oil and gas prices ended on a sour note with no agreement on anything.
The US dollar edged higher on Friday night (see the other commodities story) which helped oil futures in the US and Europe sell-off as the tentative optimism about a possible production cut deal evaporated.
West Texas Intermediate (WTI, the US price benchmark) January crude settled below $US40 a barrel at $US39.97 a barrel after OPEC members agreed to do nothing but keep pumping crude at current production levels of more 31 million barrels a day. WTI later edged back over$US40 in after hours electronic trading.
In London, January Brent crude the global oil benchmark, lost 84 cents, or 1.9%, to close at $US43 a barrel.
Both crude contracts closed down 4.2% for the week.
At their meeting in Vienna, OPEC members made no mention of a production target in their final statement.
OPEC President Emmanuel Ibe Kachikwu told reporters that members saw no need to mention a figure, but said there had been agreement to maintain a ceiling that reflects “current actual production.”
OPEC has had a production ceiling of 30 million barrels a day, but members have been producing closer to 31.5 million barrels a day, according to market estimates. Reuters reported that OPEC members in fact could only manage to meet again next June.
Venezuela lead a group that wanted an immediate cut of a million barrels a day (essentially a token cut), but the Saudis reportedly told the meeting that they would not cut until the rest of the group agreed to make cuts at the same time. The Saudis remain suspicious of other countries taking their market share.
OPEC’s secretary general Abdullah al-Badri said OPEC could not agree on any figures because it could not forecast how much new oil Iran would add to the market next year, as sanctions are withdrawn. Iraq meanwhile is producing oil at record levels and has no intention of cutting back (it needs the money, like all other producers).
Iran has made its position clear ahead of the meeting, saying it would raise supply by at least 1 million barrels a day – or around 1% of global supply – after sanctions are lifted.
Global production is already 2 million barrels a day higher than demand and an estimated 3 billion barrels of oil and oil products have been stockpiled on land and on sea around the world this year.
That means weaker prices again for much of 2016.
