Brent crude has tumbled three per cent to below $75/barrel today (November 27th) at 15:41 GMT, the lowest level since September 2010, as the Organization of Petroleum Exporting Countries (Opec) agreed to leave output unchanged. Its collective daily oil output target thus remains at 30 million barrels for the next six months.
The decision comes after a lenghty meeting of its dozen members this afternoon – despite a global supply excess that has sent crude prices to a four-year low.
This global surplus is due to ongoing US production and Opec supplies ahead of targets, along with a slowdown in demand in China and Europe. Suhail bin Mohammed al-Mazroui, UAE oil minister, said the market would “fix” prices. "I don’t think we should panic. There is nothing that should cause us to panic," he added, quoted by the Financial Times.
The Opec decision was mostly forecast by markets, with the major Gulf producers expected to win the debate. This is not the result hoped for by smaller producers, such as Venezuela and Ecuador, who have been struggling in the tumbling price environment.
Rafael Ramírez, Venezuela’s Opec representative and foreign minister, said cuts were needed as the market was oversupplied by two millions barrels.
"Everyone is conscious the price is too low. Too low for everyone. For the consumer, for the producer, for the investor," he said. Oil has declined significantly this year, down almost 30 per cent since June, largely due to lower demand in Europe and China, the stronger US dollar and the boom in US shale production.
According to a BBC analysis, the Saudi strategy may be aimed at retaining dominance of the market in the face of increasing shale oil production in the United States.
"The shale boom has been one of the drivers behind the decline in the oil price, but as the oil price dips, shale becomes less economical to produce."
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