OPEC set for no change in oil output

The OPEC oil producers’ cartel was set Friday to leave its output unchanged despite oversupply and a fresh drop in crude prices, as it seeks to preserve market share.

Ministers were gathering at OPEC’s Vienna headquarters for their meeting amid stubborn fears over chronic global oversupply that sparked a recent oil price collapse.

Nevertheless, cartel kingpin Saudi Arabia expressed satisfaction over a rebound in price levels since the start of the year, as a result of the brighter outlook for the world economy and energy demand.

“Demand has been growing and supply diminishing,” Oil Minister Ali al-Naimi told reporters Friday heading into the meeting.

“The situation is improving and we hope it will continue improving,” added Naimi, who also denounced media speculation over his retirement as “a pack of lies”.

The Organization of the Petroleum Exporting Countries, which accounts for a third of the world’s oil supplies, will likely pursue its plan to maintain its market share and pressure high-cost US shale producers.

OPEC, which has traditionally defended price levels, switched strategy last November when it opted to leave its collective production target at 30 million barrels per day — where it has stood for about three and a half years — despite a recent price slump that slashed precious revenues for its 12 member nations.

In Friday late morning deals, New York’s West Texas Intermediate (WTI) crude and London’s Brent oil both fell as traders fretted that a no-change decision would further fuel the burgeoning supply glut.

WTI for July delivery was down 36 cents at $57.64 per barrel, while Brent for the same month dipped 16 cents to $61.87.

“OPEC supply chatter continues to indicate market oversupply will not end any time soon (as) the group of major oil producing economies … continue in their battle to retain market share in the face of an increasingly self-sufficient United States,” said Accendo Markets analyst Michael Van Dulken.

– Prices ‘not good’: Iran –

Ministers have however declared they would be happier with prices between $75 and $80 a barrel to boost revenues and help balance their budgets. Angola, Ecuador, Iran, Iraq and Venezuela have all appealed for higher prices that encourage investment.

“This (current) level of price is not good for many of the OPEC members,” Iran’s Oil Minister Bijan Zanganeh said.

“Most of the OPEC members believe that the price around $75 is a fair price for both sides of the market.”

Ecuador’s Pedro Merizalde, minister for non-renewable natural resources, added: “Everyone wants to sell its products at a better price, but the market sets the price.”

Officials have expressed frustration with low prices but gave no hint that they would move to cut output to tighten supply.

The global oil market, plagued with demand worries, oversupply and booming US shale output, collapsed 60 percent between June 2014 — when WTI crude stood at about $106 per barrel — and late January, when it hit a six-year low under $45.

Losses accelerated in November after OPEC’s change in policy, but analysts say the strategy has paid off as US shale oil producers have been squeezed and crude has recovered in recent months, helped by the brighter outlook for the world economy and energy demand.

“We were two years late on evaluating shale oil, that’s why it came almost as a shock,” said Iraq’s Oil Minister Adel Abdel Mahdi.

“It should not have been a shock given that we knew they were working on (extracting) shale oil. Now this is the reality and we have to take it into consideration. The market will adjust.”

OPEC is actually producing about 31.2 million bpd according to International Energy Agency data, due to extra supplies from Saudi Arabia and Iraq — which has ramped up output in areas not hit by Islamic State jihadists.

– Iran eyes boosting production –

Analysts fear the market could be further saturated with oil from Iran should Western sanctions be lifted after a nuclear deal with world powers.

Zanganeh already revealed earlier this week that it could ramp up oil production by an extra one million barrels per day, within half a year of sanctions being removed.

He has written to fellow ministers asking them to consider Tehran’s return to the market.

“Iran wants to raise (output) and the conference will discuss it,” OPEC Secretary-General Abdullah El-Badri said, while Naimi described the Islamic republic’s oil production as a “sovereign right”.