OPEC Split over Supply Levels as Oil Prices Slip
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Crude prices fell to an eight-month low yesterday amid market speculation over the future of oil supplies and uncertainty over global energy demand. OPEC oil ministers meet in Vienna later today for a policy meeting, but deep divisions within the group are already surfacing.
Crude prices have fallen more than 20 percent from its peak in May, and price hawks in the Organisation of Petroleum Exporting Countries are concerned that the deepening eurozone crisis and weak global economic climate will send crude prices plummeting further.
Crude prices fell to an eight-month low yesterday amid market speculation over the future of oil supplies and uncertainty over global energy demand. OPEC oil ministers meet in Vienna later today for a policy meeting, but deep divisions within the group are already surfacing.
Crude prices have fallen more than 20 percent from its peak in May, and price hawks in the Organisation of Petroleum Exporting Countries are concerned that the deepening eurozone crisis and weak global economic climate will send crude prices plummeting further.
Benchmark oil for July delivery fell 0.8 percent yesterday to close at $82.62 per barrel on the New York Mercantile Exchange, its lowest close since October. In London, Brent crude futures settled 1 cent lower at $97.13, a fresh 17-month low.
OPEC is scheduled to begin its two-day quarterly meeting later today, but the 12-nation cartel is already split on its production policy.
Saudi Arabia, OPEC’s top exporter and the world’s only major swing producer, has come under intense pressure from fellow OPEC members to cut oil output to prevent a further slide in crude prices.
Since the last OPEC meeting in December, Saudi Arabia has ramped up its own oil production as it sought to provide stability in global oil supplies and offset the loss of Iranian oil once an EU embargo against Tehran comes into effect July 1st.
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In December, OPEC agreed to an oil ceiling of 30 million barrels per day, but the excess from Riyadh as lifted actual supply to 31.6 million barrels per day in May.
OPEC Secretary General Abdalla Salem el-Badri acknowledged “some oversupply” on the market, but predicted the group would eventually settle on an agreement.
In its monthly oil-market report published yesterday, the International Energy Agency warned that the impact of sanctions on Iran remains unclear and raises the risk of a tighter supply market in the months ahead.
The IEA said:
[quote] The market can clearly now be characterised as ‘better supplied’ but ‘oversupplied’ looks something of a stretch given the myriad uncertainties that lie ahead for the summer. [/quote]
Related News: OPEC Outrage at IEA’s Release of Oil Reserves
The sheer fact that OPEC holds more than 80 percent of global proven oil reserves and accounts for nearly 40 percent of global crude output makes it an influential player in setting global prices for oil and refined products such as gasoline.
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