Opec to retain oil production levels despite falling price

<p>Saudi Arabia’s oil minister has stated that Opec will not cut oil production even if prices drop below $20 a barrel.</p>

The Organization of Petroleum Exporting Countries (Opec) will not cut oil production even if prices drop below $20 (£13), according to Saudi Arabia's oil minister.

Ali al-Naimi explained that a decision to reduce the cartel's output would be irrelevant when it came to price. It means that Opec will continue to produce the same amount despite the value of oil slumping dramatically over 2014. In the space of a year the price of Brent crude and US crude has halved.

Speaking to the Middle East Economic Survey, Mr al-Naimi said: "As a policy for Opec – and I convinced Opec of this, even Mr al-Badri [Opec secretary general] is now convinced – it is not in the interest of Opec producers to cut their production, whatever the price is. Whether it goes down to $20, $40, $50, $60, it is irrelevant."

The price of oil has been a contentious point in recent months. In November, a meeting of Opec members discussed the possibility of reducing production to attempt to stimulate prices. Both Saudi Arabia and the United Arab Emirates had been against a cut while non-member Russia also opposed a change.

Despite being support from other members for a reduction the decision was made to keep oil prices at their current level. This standpoint was reinforced earlier in December when Mr al-Badri stated that a change in the price would not dictate the oil output of the member nations. His comments came as Brent crude fell to a five-year low.

Russia relies heavily on the performance of the oil markets. The country generates revenue from oil export sales and the falling prices have impacted on its economy. Combined with tightening Western sanctions and the tumbling value of the rouble, Russia is standing on the brink of recession.

Find out about commodities trading and learn CFD strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.