OPEC maintains production levels as oil price drops further
CALGARY – ENERGY – The price of a barrel of oil tumbled today on market uncertainty after the close of the OPEC meetings in Vienna. The OPEC Conference reviewed the oil market outlook, in particular supply/demand projections for the first, second, third and fourth quarters of 2015, with emphasis on the first half of the year.
OPEC also considered forecasts for the world economic outlook and noted that the global economic recovery was continuing, albeit very slowly and unevenly spread, with growth forecast at 3.2% for 2014 and 3.6% for 2015.
The Conference also noted, importantly, that, although world oil demand is forecast to increase during the year 2015, this will, yet again, be offset by the projected increase of 1.36 mb/d in non-OPEC supply. The increase in oil and product stock levels in OECD countries, where days of forward cover are comfortably above the five-year average, coupled with the on-going rise in non-OECD inventories, are indications of an extremely well-supplied market.
OPEC, the oil producers’ cartel, has decided to leave its production quotas unchanged.
Oil prices on the world markets have seen the price of a barrel fall by 30 percent since the end of June.
The supply news from the OPEC meeting sent an already falling price down another three dollars to 75$ a barrel.
“ We don’t want to panic, I mean it, and also we want to see how the market behaves because the decline of the price does not reflect the fundamental change. This is true as far as we see it here in OPEC,” said Secretary-General Abdalla Salem El-Badri.
In just four months oil has slid down a slippery slope of overproduction, falling demand, and increased competition from non-OPEC sources such as US shale oil. And 2008’s low price has not been tested yet.
“By late December the price had gone down to $36 a barrel. Now, I’m not saying that’s going to happen again, but if it could happen back in 2008, there’s no reason why it can’t happen again in 2014, given that we do have a rapid build-up in supply and very weak demand growth,” said head of analysis at Lloyds List Intelligence, Neil Atkinson.
The decision favours OPEC’s richer members over its poorer ones. Venezuela was visibly angry with unchanged production levels, but the Saudis, among other things, want a weak price to slow US shale oil expansion, which becomes uneconomic if the price falls low enough.
Video by Euronews