BackOpec leaves output ceiling unchanged at 30 million barrels
Brent crude for January settlement declined $5.17 to $72.58 a barrel in London, the lowest since August 2010
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Vienna: The Organization of the Petroleum Exporting Countries, or Opec, took no action to ease a global oil-supply glut, resisting calls from Venezuela that the group needs to stem the rout in prices. Futures slumped the most in more than three years.
The group maintained its collective production ceiling of 30 million barrels a day, Ali Al-Naimi, Saudi Arabia’s oil minister, said on Thursday after the 12 nations met in Vienna.
Brent crude futures slumped to the lowest level in more than four years. West Texas Intermediate (WTI) slid below $70 for the first time since 2010.
Oil tumbled into a bear market this year as the US pumped the most in more than three decades and conflicts in West Asia and Ukraine failed to disrupt supply. While Opec’s 30- million-barrel limit has been in place since 2012, the group actually produced almost 1 million barrels more last month, data compiled by Bloomberg show.
“Opec has chosen to abdicate its role as a swing producer, leaving it to the market to decide what the oil price should be," Harry Tchilinguirian, head of commodity markets at BNP Paribas SA in London, said on Thursday by phone. “It wouldn’t be surprising if Brent starts testing $70."
Brent, a global benchmark, is poised for the biggest annual decline since 2008.
Brent for January settlement declined $5.17 to $72.58 a barrel on the London-based ICE Futures Europe exchange, the lowest since August 2010.
The Norwegian krone, the currency of Western Europe’s largest crude producer, dropped to a five-year low against the dollar. The Canadian dollar fell for the first time in three days and the Russian rouble tumbled. Shares of oil and gas companies were the biggest losers in global stock markets. BP Plc dropped 2.7% in London while Royal Dutch Shell Plc declined 3.9%.
“The change is that it’s no longer Saudi Arabia and Opec that are going to be managing the supply side of the market," Michael Wittner, head of oil market research at Societe Generale SA, said in an email. “That is so fundamental, it is hard to overstate."
Opec will meet again on 5 June, according to a delegate, who asked not to be identified in line with policy. The decision not to change the production ceiling was anticipated by 58% of respondents in a Bloomberg Intelligence survey this week.
“We are not sending any signals to anybody, we just try to have a fair price," secretary general Abdalla El-Badri said at a press conference after the meeting. The group will abide by the limit, he said. El-Badri will retain his position until the end of 2015, according to the delegate.
Iranian oil minister Bijan Namdar Zanganeh told reporters after the meeting that he was “not angry" about the decision, but it was “not in line with what we wanted".
Venezuela, whose currency reserves are close to the lowest in 11 years, planned to push for a production cut, Rafael Ramirez, Venezuela’s Opec representative, said before the meeting started. “Everybody has to make some sacrifice," Ramirez said, estimating the global oversupply at 2 million barrels a day. Kuwait put the glut at 1.8 million barrels. Ministers from Kuwait, the United Arab Emirates and Angola said they were concerned about the surplus in the market as they arrived at the group’s headquarters.
WTI for January delivery dropped $4.64, or 6.3%, to $69.05 a barrel in electronic trading on the New York Mercantile Exchange, the least since May 2010.
Opec’s output exceeded the ceiling in October for a fifth consecutive month, according to data compiled by Bloomberg. The group’s 12 members produced 30.97 million barrels a day in October. It estimates the world will need 29.2 million barrels a day of its crude next year, according to a report on 12 November. Bloomberg
Nayla Razzouk in Dubai and Grant Smith and Lananh Nguyen in London contributed to this story.
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