The Organization of the Petroleum Exporting Countries (OPEC) concluded its semi-annual meeting Friday in Vienna with a press release congratulating Nigeria’s new minister of state for oil and announcing the election of Qatar’s minister of energy and industry as the group’s leader for the coming year. The release also had a few words to say about oil.
They just weren’t the words investors and traders wanted to hear. Here’s what OPEC said:
In examining the current status of the oil market, the Conference respected the input and ideas of all Member Countries to find ways and means to deal with the challenges they are facing in the global oil market today. The Conference observed that, since its last meeting in June, oil and product stock levels in the OECD have continued to rise. The latest numbers see OECD and non-OECD inventories standing well above the five-year average.
Having reviewed the oil market outlook for 2015, and the projections for 2016, the Conference observed that global economic growth is currently at 3.1% in 2015 and is forecast to expand by 3.4% next year. In terms of supply and demand, it was noted that non-OPEC supply is expected to contract in 2016, while global demand is anticipated to expand again by 1.3 mb/d.
In view of the aforementioned, and emphasizing its commitment to ensuring a long-term stable and balanced oil market for both producers and consumers, the Conference agreed that Member Countries should continue to closely monitor developments in the coming months.
Here’s what the cartel didn’t say: OPEC production has risen from 30 million barrels a day to a de facto 31.5 million barrels, and when Iran is freed from sanctions the world should expect that number to rise further. Neither of these developments is likely to push crude oil prices higher.
OPEC’s strategy of maintaining market share regardless of price continues to cut new exploration and development budgets in the United States and has begun to slow U.S. production. But the entire process is proceeding much more slowly than many OPEC members would like and can afford. There appears to be more than enough pain to go around.
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