OPEC export price falls below $40 per barrel
The average price of crude oil sold by the Organisation of Petroleum Exporting Countries (OPEC) fell below $40 a barrel for the first time since 2009, underscoring the financial cost of the group’s strategy to defend its market share.
The daily OPEC basket price dropped to $39.21 a barrel on November 13, according to an e-mail on Monday from the organization’s secretariat in Vienna.
The basket, an average of export grades from each of the group’s 12 members, typically trades below international oil futures as some OPEC nations pump denser or higher-sulfur crude that’s less profitable to refine.
Oil has slumped since the middle of last year as OPEC keeps output elevated to pressure rivals it sees as responsible for creating a global surplus.
A decline in production among its higher-cost competitors, including U.S. shale drillers, has now slowed, with output still above last year’s level.
With OPEC members’ revenues diminished, the group may reconsider its approach if the price slump persists, according to the International Energy Agency.
According to the Managing Director of Petromatrix GmbH in Zug, Switzerland, Olivier Jakob, low oil prices aren’t just problematic for higher-cost producers. “It is also providing a challenging fiscal environment” for OPEC nations.
OPEC’s yearly revenues may be curbed to $550 billion at current prices from an average of more than $1 trillion in the last five years, Executive Director at the IEA, Fatih Birol said in London on November 10.
Even Saudi Arabia, the group’s biggest member, faces a budget deficit this year that the International Monetary Fund predicts will exceed 20 per cent of gross domestic product.
Still, IEA expects the price slump would need to persist for several years before the kingdom reconsiders its current strategy. OPEC Secretary-General Abdalla El-Badri, said this month that the global market is on track to rebalance next year.
OPEC ministers will meet to review their current policy on December 4 in Vienna.