DUBAI (Nov 28): 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 today after the 12 nations met in Vienna.
Brent crude dropped as much as 8.4 percent in London, extending this year’s decline to 34 percent.
Oil tumbled into a bear market this year as the US pumped the most in more than three decades and conflict in the Middle East and Ukraine failed to disrupt supply.
While OPEC’s 30-million-barrel limit has been in place since 2012, the group actually produced almost one 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 in London, said today by phone.
“It wouldn’t be surprising if Brent starts testing US$70.”
Brent, a global benchmark, is poised for the biggest annual decline since 2008 on the ICE Futures Europe exchange in London.
Futures fell the most since May 2011 and traded down US$5.17 to US$72.58 a barrel.
Ruble slumps
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 ruble tumbled.
Shares of oil and gas companies were the biggest losers in global stock markets.
BP dropped 2.7 percent in London while Royal Dutch Shell declined 3.7 percent.
“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, said in an e-mail.
“That is so fundamental, it is hard to overstate.”
The Organization of Petroleum Exporting Countries considered a cut of five percent in output, according to Iraqi Oil Minister Adel Abdul Mahdi.
That’s about 1.5 million barrels a day based on the current ceiling.
“If you cut five millions, this will raise the prices of course,” Mahdi said. “No one discussed a large cut, maybe five percent was the utmost that some people wanted.”
Fair price
OPEC will convene again on June 5 in Vienna.
The decision not to change the production ceiling was anticipated by 58 percent 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. The group will abide by the limit, he said.
El-Badri will retain his position until the end of 2015.
'Not angry'
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 two 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.
West Texas Intermediate, the US benchmark, dropped 6.3 percent, extending this year’s slump to 30 percent.
Futures declined US$4.64 to US$69.05 a barrel on the New York Mercantile Exchange.
OPEC pumped 30.97 million barrels a day in October, exceeding the ceiling for a fifth consecutive month, according to data compiled by Bloomberg.
The group estimates the world will need 29.2 million barrels a day of its crude next year, according to a report on Nov 12.