RELATED ARTICLES: OPEC oil output highest since 2012; Aramco: OPEC will take price of oil as it comes; Kuwait: OPEC unlikely to cut output
If OPEC countries fail to cut its production fast enough, crude prices will slump further says Iran’s oil ministry, UK daily TheTelegraph has reported.
“In 1998 inadequate reaction by OPEC sent oil prices to as low as $6 to $8 per barrel,” said Mehran Amirmoeini, a top energy adviser. He added:“When the market is faced with falling demand and simultaneously rising supply, naturally some countries try to absorb customers by offering discounts.”
Last weeks Saudi Arabia and Iran both slashed their contract prices for crude shipped to Asia, while the brent oil fell briefly to a four-year low under $90 per barrel on 5th October.
Saudi Arabia made a move to boost its oil production by 100,000 bpd last month as OPEC remained divided on how to manage the recent decline in prices and the saturation of the market with US shale oil drilling.
Gulf states led by Saudi Arabia and the UAE say there is no need to convene an emergency meeting ahead next month’s planned gathering of OPEC when the group will decide on its production quotas heading into the north part of Erope and Asia in the winter, a period when global supplies can become tight depending on the weather.
Last week Iran back-tracked on an earlier call to bring together Opec early to arrest the price decline. However, Venezuela, South America’s major producer, called for the meeting scheduled for 27th November to be brought forward.
“The oil market is gradually beginning to panic,” said Commerzbank analysts in a note to investors. “The price slide has doubtless become more speculative in nature of late as the deteriorating global economic outlook, growing risk aversion and ample supply prompts more and more market players to bet on falling prices.”
OPEC’S current production ceiling is set at 30mn bpd of crude and a decision to cut by around 500,000 bpd to balance the market if taken would be its first decision to trim output since December 2008. Some analysts have suggested that OPEC’s biggest producers may be targeting lower oil prices in a move to win back market share from high-cost producers.
The boom in shale oil in the US has reduced the cartel’s share of the market in the world’s largest economy. Recent research from Deutsche Bank has suggested that 9pc of US “tight oil” would be uneconomic at prices below $90 per barrel and around 40pc if the prices slips below $80.
