OPEC set a record oil-output ceiling of 31.5 million barrels a day, a level that’s in line with the group’s most recent production estimate. Crude fell as much as 3.6 percent in New York.
The increase from a previous target of 30 million barrels doesn’t include production from Indonesia, which joined the group after a break of almost seven years, according to a delegate with knowledge of the matter, who asked not to be identified because the decision hasn’t been made public.
The Organization of Petroleum Exporting Countries sent crude prices reeling a year ago when it decided to maintain output as it sought to force higher-cost producers to scale back their operations in an oversupplied market. Saudi Arabia, OPEC’s biggest producer and architect of the current policy, has remained opposed to a production cut unless countries outside the group cooperate. OPEC also needs to prepare for increased shipments from Iran when international sanctions are lifted.
“This decision reflects the consensus going into the meeting of OPEC’s policy for prices needing to find a floor to deter new non-OPEC supply projects,” Gareth Lewis-Davies, London-based energy strategist at BNP Paribas SA, said by phone. “The higher quota reflects the realpolitik of accommodating Iran.”
Iranian Production
Crude slumped about 38 percent in the last year, with global benchmark Brent crude headed for its lowest annual average in a decade after reaching a six-year low of $42.23 on Aug. 24. Brent fell 2.3 percent to $42.84 a barrel at 3:09 p.m. London time Thursday, while West Texas Intermediate crude dropped 3 percent to $39.83.
OPEC has pumped more than its collective target of 30 million barrels a day the past 18 months, data compiled by Bloomberg show. The group pumped about 31.4 million barrels a day in October, according to its market report.
Iran won’t accept any production curbs until it restored about 1 million barrels a day of output, Oil Minister Bijan Namdar Zanganeh said on Friday before sitting down with his OPEC counterparts. Saudi Arabia said it didn’t feel obliged to cut production, which is running close to a record.
The OPEC meeting in Vienna has entered a second session, according to two delegates familiar with the matter, who asked not be identified.
Squeezing Incomes
OPEC’s policy is squeezing incomes for its members, whose combined annual revenue could fall to $550 billion from an average of more than $1 trillion in the past five years, the International Energy Agency said Nov. 10.
“The OPEC member countries have lost so much money,” Zanganeh said Thursday in the Austrian capital.
Venezuela, whose foreign currency reserves are at the lowest level in 12 years, led calls for a reduction in output, supported by Ecuador. Iran is poised to boost output after sanctions over its nuclear program are lifted and it won’t seek permission from OPEC to do so, Zanganeh said last month. OPEC requires consensus among members to alter its output ceiling.
Global oil stockpiles have risen to record levels as Saudi Arabia, Russia and Iraq boosted supply, the IEA said on Nov. 13. The market is oversupplied by as much as 2 million barrels a day, Zanganeh said this week, equivalent to about 2 percent of global output.
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