The Organisation of the Petroleum Exporting Countries (OPEC) issued concerns over the potential threat of the falling oil prices in the upcoming year if the member nation and outside producers do not cut back production.
The global oil prices fell with the United States increasing its crude oil stocks. As a consequence, International Brent crude futures were down 82 cents at $54.90 per barrel while U.S. West Texas Intermediate (WTI) crude oil futures were down 92 cents at $52.06 a barrel, reported Reuters.
In a monthly report, OPEC said that without cuts the 2017 overhang would reach 1.24 million bpd (barrel per day), about 300,000 bpd higher than the forecast in its previous report. In a surprising turn of events, data from the American Petroleum Institute showed U.S. crude inventories rose by 4.7 million barrels in the week to Dec. 9, compared with analysts’ expectations for a 1.6-million-barrel decline.
In an effort to end two years of oversupply and cheap oil, OPEC and 11 producing countries from outside the group agreed to cut almost 1.8 million bpd of production.
On Wednesday, oil price saw a considerable fall from the previous sessions after Saudi Arabia ruled out production cuts. The industry data also showed a build in US crude stocks.
However, Iran on the other side has made it a point that it will not restrain the production of oil after the international sanctions against it were lifted. It further called the joint Russian-Saudi proposal of output freeze, ‘laughable’.
Bijan Zanganeh told the Iranian news agency ISNA that some of Iran’s neighbours have increased their production to 10 million barrels a day in recent years and export this amount, and now they have the nerve to say everyone should freeze production together. While they freeze their production at 10 million barrels, Iran is to freeze at 1 million barrel, which is a laughable proposal.
The falls in U.S. West Texas Intermediate (WTI) crude futures and International benchmark Brent futures were due to lack of cooperation between Organization of the Petroleum Exporting Countries (OPEC) members. They were unable to decide whether to freeze or cut production to control oversupply that has kept the prices low by 70 per cent since 2014.
Saudi Arabia’s oil minister Ali Al-Naimi was of the view that a coordinated production cut by OPEC and non-OPEC exporters was not something that would happen because not many countries are going to deliver.
Russia, a non-OPEC member has tentatively agreed on freezing its output at January levels, which was when they hit a post-Soviet record.
To cope with falling oil revenues, even poorer OPEC nations like Nigeria have been forced to adopt austerity measures.
Oil prices stumbled for the seventh consecutive session, coming close to their 11-year low. The prices of crude oil could worsen in the fourth coming months, due to a pricing war between leading Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producer.
Brent crude fell below $38 a barrel for the first time in six years on Friday with the International Energy Agency (IEA) declaring that, demand growth was slowing down while the OPEC output remained high. Meanwhile, U.S. crude, settled in the $35 zone.
Since OPEC has lifted the output ceiling starting on December 4, both benchmarks were on a constant fall, with more than 13 per cent being shed from each. OPEC has been thrusting record levels since last year to try and drive higher-cost manufacturers such as U.S. shale firms out of the market.
On Friday, IEA said that the global supply glut was likely to deepen next year and put more pressure on prices.