The 12-member Organization of the Petroleum Exporting Countries (OPEC) are now divided on whether to cut supply after a drop in oil prices, even as core Gulf members are hoping that winter demand will revive the market. This suggests that the group is not closer to any collective steps.
The differing views within the Organization highlight a split between Saudi Arabia and its Gulf Arab allies and other members, such as Iran, who face greater budget pressures from sub-$100 oil.
“It is really bad that prices are falling, which is a result of increased U.S. production, slower economic recovery of the EU and lower growth in China,” said a delegate from one of OPEC’s African members, adding: “I think that the next OPEC meeting will have to deal with the matter.”
OPEC meets to set its oil output policy on November 27.
Oil has fallen from $115 in June to a 27-month low below $92 a barrel on Thursday, after Saudi Arabia cut its official crude selling prices, raising concern in the market that OPEC’s top producer would not reduce its output.
A second source familiar with OPEC policy said, while the market was weak, with supply exceeding demand, it was too early for OPEC to think of joint action to bolster prices.
“A collective OPEC decision needs clear signals from each country, which is not there yet,” the source said.
So far, only Iran has called publicly for OPEC to act to support prices. OPEC’s Gulf Arab producers so far remain unworried, with Saudi Arabia’s oil minister appearing to downplay the price drop and delegates have stopped short of calling for action to bolster prices.
OPEC’s output is climbing and in September hit 30.96 million barrels per day (bpd) which is its highest since November 2012, due to further recovery in Libya and higher output from the Gulf producers.
That is almost 1 million bpd more than OPEC’s official production target of 30 million bpd and almost 2 million bpd more than OPEC’s forecast of the average global demand for its crude in 2015.
Cutting output would be a challenge for OPEC, analysts say. The group has not collectively lowered its supply since the 2008 financial crisis and lacks a system of individual output quotas to enforce any cutback agreement. [myad]
