VIENNA // Opec agreed to stick by its policy of unconstrained oil output for another six months yesterday, setting aside warnings of a second lurch lower in prices as some members such as Iran look to increase exports.
Concluding a meeting with no apparent dissent, Saudi Arabian oil minister Ali Al Naimi said Opec had rolled over its current output ceiling of 30 million barrels per day, renewing support for the shock market treatment it doled out late last year when the world’s top supplier said it would no longer cut output to keep prices high.
With oil prices having rebounded by more than a third after hitting a six-year low of US$45 (Dh165) a barrel in January, officials meeting in Austria saw little reason to tinker with a strategy that seems to have resurrected moribund growth in world oil consumption and put a damper on the US shale boom.
“You’ll be surprised how amicable the meeting was,” Mr Naimi said after the gathering of the 12-nation oil producers’ cartel that pumps a third of the world’s crude.
UAE Oil Minister Suhail Mohammed Al Mazrouei said that the global supply glut in oil was diminishing.
The UAE, along with Kuwait and Qatar, backed Saudi Arabia’s strategy.
He said that the re-balancing of the oil market would take some time and that the decision by Opec to maintain the production level unchanged was the right decision.
“The markets are moving in Opec’s favour,” said Gary Ross, Pira Energy Group executive chairman. “Prices are stimulating robust demand growth and slowing capital expenditure. This was the objective of the Saudi strategy and it’s working.”
The current ceiling has been in place for more than three years, making it the most enduring quota in the group’s 55-year history.
Opec is pumping 31.2 million bpd, due to increased supplies from Saudi Arabia and Iraq, according to International Energy Agency data.
In response to yesterday’s decision, oil prices rebounded at first, but then fell back into negative territory.
Benchmark crude prices rallied 34 per cent from a six-year low in January and traded at $61.68 a barrel in London yesterday afternoon.
While oil ministers have maintained a relentlessly upbeat attitude this week, some analysts see dark clouds.
The US tight oil industry has been more resilient than many had expected, with falling costs helping sustain the US oil shale revolution and possibly setting up another downward spiral.
Most Opec members think $75 is a fair price, Iranian oil minister Bijan Namdar Zanganeh said. He added Iran would increase production by 1 million bpd within months if sanctions were lifted.