The Organization of the Petroleum Exporting Countries decided not to cut production of crude oil during its meeting in Vienna Friday.
Emmanuel Ibe Kachikwu, president of OPEC and minister of state for petroleum resources in Nigeria, said the market’s outlook is too cloudy to cut production. With dropping output from non-OPEC countries and Iran coming on to the global oil market soon after international sanctions lift, the cartel felt it was not the right time to make a decision, Kachikwu said.
“We’ll retain production at current levels and we’ll hopefully converge to meet sometime between January and June,” he said.
The news is good for consumers, as keeping output high will keep global oil prices low, but it will continue to squeeze U.S. oil producers, particularly frackers, whose drilling methods are more expensive than conventional means. American energy companies have shed thousands of jobs and ceased production at thousands of sites as the oil glut has increased and profits have dwindled.
OPEC’s decision follows expectations of Friday’s meeting, although some reports indicated the cartel would raise production by 1.5 million barrels per day. That decision was not announced at Friday’s press conference.
The next full OPEC meeting will be held in June.
The cartel’s decision to not cut production was largely driven by Saudi Arabia and other rich nations in the cartel. Countries such as Venezuela and Algeria argued before the meeting that they would like a 5 percent cut in oil production to shore up their countries’ economies.
Kachikwu said beliefs that OPEC could simply cut oil production and fix problems for those countries are misguided. He said cooperation between OPEC and non-OPEC countries is needed more than ever and OPEC’s influence over the market is not total.
“The world dynamics have [sic] changed,” he said. “… The market is going to go in natural dynamics.”
However, many observers will see OPEC’s decision as proof the cartel is confident that it is winning its fight with the United States and other non-OPEC countries over market share.
Before the meeting, industry analysts told the Washington Examiner that the cartel could decide to keep prices low after seeing the effect its decision last year to not cut oil production, in the face of a price collapse, had on the American energy sector. The United States had risen to become the top producer of oil and natural gas in the world at the time.
Kachikwu cited the uncertainty in the non-OPEC market as one of the reasons to continue production.
“What you see over the last one year, or half-year, is that the volumes coming from non-OPEC members are beginning to drop,” he said.
