OPEC has decided against cutting the amount of oil it produces despite a glut in global supplies, triggering a five-dollar collapse in crude prices.
The cartel pumping out one-third of the world’s oil opted to stick by its output target, even after prices have plunged by 35 percent in value since June.
The 12-nation cartel “decided to maintain the production level of 30 million barrels per day” where it has stood for three years, the Organisation of Petroleum Exporting Countries said in a communique.
It seems likely that there was substantial disagreement between those members of OPEC, such as Iran and Venezuela, who had been calling for output cuts, and the Gulf members who are in stronger financial positions.
OPEC Secretary-General Abdullah El-Badri said the cartel would sit tight before the next output meeting scheduled for June in Vienna, where it is headquartered.
“We have to wait and see how the market will settle,” he told the meeting’s closing press conference.
“As I said many times… we don’t want to panic.”
Going into the latest meeting, OPEC faced pressure from its poorer members, notably Venezuela, to cut output as collapsing prices slashed their precious revenues.
However, its powerful Gulf members rejected calls to turn down the taps unless they are guaranteed market share in the highly competitive arena, particularly in the United States, where a flood of cheaper oil from shale rock
has contributed to the global oversupply.
“We should withdraw the overproduction from the market,” Venezuelan Foreign Minister Rafael Ramirez told reporters ahead of Thursday’s outcome.
The OPEC decision sent world oil prices tumbling to fresh four-year lows. New York’s West Texas Intermediate for January slumped to $67.75 a barrel – the lowest level since late May 2010.
London’s Brent North Sea crude for January delivery nosedived to $71.25 – also a four-year trough.
OPEC “may have come to the conclusion that a period of lower oil prices could potentially work in the group’s favour over the longer term, given the boost it should provide to the global economy and hence to demand”, Tom Pugh, commodities analyst at Capital Economics research group, told the AFP news agency.
“Nonetheless, it seems likely that there was substantial disagreement between those members of OPEC, such as Iran and Venezuela, who had been calling for output cuts, and the Gulf members who are in stronger financial positions.”
Crude prices are being depressed also by a strong dollar and worries about stalling energy demand in a weak global economy.
The International Energy Agency (IEA) recently warned that the “price rout” was not over, and that crude futures would slide well into 2015.
Plunging oil prices have fanned concerns about the growing threat of deflation in the world economy, and particularly in the eurozone.
Ahead of the meeting, OPEC kingpin and world’s top oil producer Saudi Arabia cut charges for US customers in a move seen as a bid to maintain its market share amid increasing competition there from shale energy.
OPEC has meanwhile insisted that it is not solely up to the cartel to tackle the oversupply that is sending crude prices crashing.
On Thursday, the cartel appointed Nigeria to its rotating presidency for 2015, meaning the country’s oil minister Diezani Alison-Madueke becomes OPEC’s first female president.