03 December 2015, Sweetcrude, Lagos – Ahead of the December 4 meeting of the Organisation of the Petroleum Exporting Countries, OPEC, ministers in Vienna, Austria, analysts are of the opinion that the organisation might not change its current strategy of defending its market share as a way of combating a supply glut that has sent oil prices crashing many folds.
“It’ll take more than $40 crude to make OPEC change its mind”, analysts said before the group’s December 4 meeting, according to Bloomberg.
In the year since OPEC chose to defend its market share, and let prices sink, a 44 percent plunge in crude has slashed members’ revenues by almost half a trillion dollars. Undeterred, the group will press on with its strategy to batter rival producers when ministers meet this week, according to 30 analysts and traders surveyed.
Saudi Arabia, OPEC’s biggest member, appears determined to see through its plan to eliminate a supply glut by squeezing out competitors like US shale drillers, even as the resulting price collapse spurs dissent from Venezuela, Algeria and Iran.o
The kingdom’s tactic is “having the intended effect” as non-OPEC supply heads for its steepest retreat since the fall of the Soviet Union, according to the International Energy Agency.
“There’s no reason to expect any change of heart,” said Antoine Halff, a senior fellow at the Centre on Global Energy Policy at Columbia University. “The strategy is working out, it’s just not solving the problem overnight. The market is rebalancing, and there’s pressure on shale oil production, but it will take time.”
For some OPEC members, opposed to the kingdom’s plan since they unveiled it last November, the cost has been too high.
Venezuela, facing a 10 percent economic contraction this year that would be the steepest in the world, has repeatedly called for a summit between OPEC and other producers to end the crisis. Oil prices may drop to as low as the mid-$20s a barrel unless OPEC takes action to stabilise the market, Venezuelan Oil Minister Eulogio Del Pino said, advocating the group adopt an “equilibrium price” of $88 that would cover the cost of new investment in production capacity.
But, even as prices languish below levels most members need to balance their budgets, the initiative failed to win the backing of the group’s dominant Gulf-based producers.
One change ministers could agree is an increase in the group’s output target as Indonesia rejoins after a seven-year hiatus that was triggered by the Asian country’s wilting oil production.
The ceiling may be raised to 31 million barrels a day, from the current 30 million, according to two OPEC officials who asked not to be identified.
Raising the limit would only be a formality to incorporate the returning member, without any impact on actual production, according to Miswin Mahesh, an analyst at Barclays Plc in London.