OPEC Heads for Status Quo as Members Clash Over Crude Output Cut
Losing Money
The divisions are a sign of how a year of low prices -- and the prospect of more months of cheap oil -- are hurting OPEC nations. The 12-member group’s annual revenue may fall to $550 billion from an average of more than $1 trillion in the past five years, the International Energy Agency said Nov. 10.
“The OPEC member countries have lost so much money,” Iranian Oil Minister Bijan Namdar Zanganeh said after arriving in Vienna. “It doesn’t seem that we can change the situation in the short term, it needs a long-term strategy."
Iran has repeatedly said OPEC should reduce production to make room for its return to the market. Yet, Zanganeh said Tehran would only consider a cap on its own production once it has reached pre-sanctions’ levels. OPEC pumps four-in-10 barrels worldwide.
Faced with dismay among members unable to balance their books, Saudi Arabia has adopted a conciliatory tone, promising to listen to all before a policy decision is made. OPEC watchers said the divisions make it more likely the group will re-affirm its current production ceiling of 30 million barrels a day on Friday.
Staying Course
"OPEC is likely to stay on course on December 4," said Gary Ross, chairman of New York based consultancy Pira Energy. OPED needs consensus among all its members before changing the group’s output target.
The official ceiling is, however, largely symbolic as countries produce above it. OPEC pumped 32.1 million barrels a day in November, exceeding its target for an 18th month, according to a Bloomberg survey of companies and analysts. The overproduction is likely to worsen next year as Iran plans to pump an additional 500,000 barrels a day once international sanctions over its nuclear program are lifted.
"We expect OPEC will likely maintain its production ceiling at the current level or adjust it upward slightly to reflect Indonesia’s re-joining the group while maintaining the goal of retaining market share in general," said oil consultancy Wood Mackenzie Ltd.
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