Despite the steep fall in oil prices in recent months, the Organization of the Petroleum Exporting Countries (OPEC) oil producers on November 27 decided not to cut petroleum production.
“It’s astonishing how weak and powerless they now seem,” Justin Urquhart Stewart, director at Seven Investment Management in London, told New Europe on November 28. “But the Saudis I assume are playing politics and they’re doing their best to try and wind up the Iranians,” he said. “They are also helping the Americans by obviously annoying [Russian President Vladimir] Mr Putin by putting the price down like that and, of course, the Americans are delighted with that because it helps put the pressure on the Russians.”
Sanctions-hit Russia, which needs higher oil prices to support its economy, tried on November 24 to convince OPEC to slash production, suggesting Moscow could cut its own crude output by about 300,000 barrels per day.
Russia and Iran will also reportedly cooperate to regulate oil market to their own favour. The agreement was made in the telephone conversation between Iranian President Hassan Rouhani and his Russian counterpart Vladimir Putin on November 24.
On news of the decision by OPEC on November 27, the price of Brent crude oil fell an additional $4 to a four-year low of about $73. American crude dropped below $70. On November 25, Brent crude oil prices had steadied near $80 a barrel.
Oil prices have fallen by almost a third since June. Prices have come under pressure as global output of crude oil outstripped demand this year. Analysts forecast excess supplies of crude to continue to build in 2015. The main new source of supply is oil extracted from US shale, which is expected to add about one million barrels a day of oil production this year and an additional one million barrels a day in 2015.
Following five hours of talks in Vienna on November 27, OPEC’s Secretary General Abdalla El-Badri told reporters the price decline “does not mean we should really rush and do something”. “We don’t want to panic,” he said. “We want to see how the market behaves.”
Some of the world’s largest exporters of oil, including Iran, Iraq, Saudi Arabia, the United Arab Emirates (UAE) and Venezuela, are members of OPEC. The group meets at least a couple of times a year, usually in its headquarters in Vienna, but sometimes more often to discuss and try to manage the global oil markets.
On November 24, Iran’s parliament reportedly recommended basing next year’s budget on an oil price of $75-80 a barrel, down from $100 in the 2014 budget plan.
The same day world powers extended talks with Iran over its nuclear programme, maintaining sanctions and preventing an immediate increase in Iranian oil supply to world markets. British Foreign Secretary Philip Hammond said the talks between Iran and six world powers had made clear progress and would resume next month. Negotiators had until June to come up with a comprehensive deal.
Iran has reduced its stockpile of low-enriched uranium gas and taken other actions to comply with the terms of last year’s interim nuclear agreement.
follow on twitter @energyinsider
Previously on Energy Insider: