Brent oil prices fell more than US$6 to US$71.25 a barrel after Saudi Arabia refused to decrease crude production at the 166th Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna
Despite huge global oversupply, the OPEC members decided to not change the oil output ceiling, sending benchmark crude plunging to a fresh four-year low, Reuters reported.
This outcome has reportedly set the stage for a battle for market share between OPEC and non-OPEC countries, as a boom in US shale oil production and weaker economic growth in China and Europe have already sent crude prices down by about a third since June this year.
“It was a great decision,” Saudi Arabia oil minister Ali al-Naimi said.
According to OPEC, the members had agreed to roll over the ceiling of 30mn bpd, at least one million above OPEC’s own estimates of demand for its oil next year.
Tariq Zahir, analyst at Tyche Capital Advisors in New York, said that the slide in US crude could continue below US$65 a barrel in coming weeks, a factor that may start to challenge the economics of North American shale oil production.
“It is a new world for OPEC because they simply cannot manage the market anymore. It is now the market’s turn to dictate prices and they will certainly go lower,” Gary Ross, chief executive of PIRA Energy Group, said.
He went on to say, “Why would Saudi Arabia cut production in the current environment? Why would they want to support Iran, Russia or US shale producers? So they must have decided: Let the market establish the price. Once the market goes to a new equilibrium, prices will go higher.”
The OPEC currently accounts for a third of global oil output.
Kuwaiti oil minister Ali Saleh al-Omair said that OPEC would have to accept any market price of oil, whether it were US$60, US$80 or US$100 a barrel.
“Saudi Arabia and OPEC will have to live with a prolonged period of low prices for any dent in US shale or production levels to happen,” Harry Tchilinguirian, senior strategist at BNP Paribas in London, noted.
