MercoPress. South Atlantic News Agency
OPEC member stands by group's decision not to cut output to tackle glut
United Arab Emirates' oil minister, Suhail bin Mohammed al-Mazroui, said that OPEC's November decision not to cut output had been the right one. Brent and US WTI crude oil prices fell to their lowest levels in almost six years on Tuesday as a big OPEC producer stood by the group's decision not to cut output to tackle a glut in the market.
Oil prices have fallen 60% from their June 2014 peaks, driven down by rising production, particularly US shale oil, and weaker-than-expected demand in Europe and Asia.
Rather than cutting output to try to balance the market, producers from the Organization of the Petroleum Exporting Countries (OPEC) are offering discounts to customers in an attempt to defend market share.
February Brent crude was down $1.06 at $46.37 a barrel, after dipping to $45.23, its lowest since March 2009. US crude for February was down $1.15 at $44.92 per barrel, off an intraday low of $44.21.
On the contrary the United Arab Emirates' oil minister, Suhail bin Mohammed al-Mazroui, said that OPEC's November decision not to cut output had been the right one.
“The strategy will not change,” he said. By not reducing output, “we are telling the market and other producers that they need to be rational”.
Oil prices have fallen so far that the front-month February contract is now trading about $7 below the July contract, encouraging traders to hire tankers to store oil at sea.
Storage plays work when traders can buy cheap oil to sell at a higher price at a future date. Deflationary pressures are beginning to build in both Asian and European economies as demand remains weak. UK inflation dipped to a 14-year low in December.
The downward pressure on oil prices is so large that even record Chinese crude imports for December, above seven million barrels per day for the first time as the world's second largest oil consumer took advantage of low prices to build up its strategic reserves, could not lift the market for long.
Banks have slashed their oil price outlook, with analysts at Goldman Sachs cutting their average forecast for Brent in 2015 to $50.40 a barrel from $83.75.
Top Comments
Disclaimer & comment rules-
-
-
Read all commentsIt is obvious what they are doing.
Jan 14th, 2015 - 11:20 am 0Drop the price way down and shake out all the oil producers with a high base cost.
Venezuela disappears, Canada and the US investment for shale drys up, then OPEC comes back and cuts production for a while and drives the price up again.
Rinse and repeat every few years to maintain oil prices.
Glut ? what glut,
Jan 14th, 2015 - 11:33 am 0FREE oil for the poor seems a good idea to me...lol
1. That won't work. You can temporarily stop exploration, newly drilled wells but technology will be forced to find cheaper and quicker ways to extract the USA (worldwide to a lesser extent) so as they try to raise prices it will bring on more quick drillings. The price of oil will be low for a long time probably a decade or more.
Jan 14th, 2015 - 12:29 pm 0I predicted this many years ago on this board.
The US Fracking has and will change the world dynamics and its not near done yet.
The next step is equipping our vehicles to use nat gas. We have a 300 yr supply on hand with more available. We're about 2 yrs away from exporting it and it will probably mostly go to the EU.
Bye bye Russia. Its already in junk bond status and going down.
The USA will become more insular as most of the high end mfg moves back on shore. We'll be an export nation again. Its about a decade away.
Just wait the cycle is just beginning
Commenting for this story is now closed.
If you have a Facebook account, become a fan and comment on our Facebook Page!