27 November 2014, Lagos – The price of oil slumped after the oil producers’ under the Organisation of Petroleum Exporting Countries decided not to cut output at its meeting in Vienna.
OPEC’s Secretary-General, Abdallah Salem el-Badri, said they would not try to shore up prices by reducing production.
Following the announcement Brent crude fell below $72 a barrel, hitting lows previously seen in August 2010.
Nigeria had adopted stringent austerity measures aimed at cushioning the harsh impact of the oil prices fall on its economy.
The 12 OPEC members decided to maintain production at 30 million barrels per day as first agreed in December 2011.
“We don’t want to panic. I mean it,” said Mr. el-Badri. “We want to see the market, how the market behaves, because the decline of the price does not reflect a fundamental change.”
Crude oil prices have fallen 30 per cent since June on sluggish global demand and rising production from the United States.
The fall in the oil price has been causing concern for several members of the oil cartel, as most require a price above $80 a barrel to balance their government budgets and many need prices to be above $100 a barrel.
“Saudi Arabia and the Gulf states can resist for a while,” the BBC quoted Simon Wardell, energy expert at Global Insight.
“They have significant financial assets, that means they can sustain a lower oil price. They can secure their budgets without a higher oil price.”
Saudi Arabia is the largest producer within the OPEC oil producing cartel.
Analysts suggest the strategy of maintaining output may be aimed at retaining dominance of the market in the face of increasing shale oil production in the United States.
The shale boom has been one of the drivers behind the decline in the oil price. But as the oil price dips, shale becomes less economical to produce.
If oil prices are allowed to remain low for some time that could cap shale production over the longer term. So keeping oil prices low may in fact make sense for OPEC, according to analysts.