“The change is that it’s no longer Saudi Arabia and OPEC that are going to be managing the supply side of the market,” Michael Wittner, head of oil market research at Societe Generale SA, said in an e-mail. “That is so fundamental, it is hard to overstate.”
The Organization of Petroleum Exporting Countries considered a cut of 5 percent in output, according to Iraqi Oil Minister Adel Abdul Mahdi. That’s about 1.5 million barrels a day based on the current ceiling.
“If you cut 5 millions, this will raise the prices of course,” Mahdi said. “No one discussed a large cut, maybe 5 percent was the utmost that some people wanted.”
OPEC will convene again on June 5 in Vienna. The decision not to change the production ceiling was anticipated by 58 percent of respondents in a Bloomberg Intelligence survey this week.
“We are not sending any signals to anybody, we just try to have a fair price,” Secretary-General Abdalla El-Badri said at a press conference. The group will abide by the limit, he said. El-Badri will retain his position until the end of 2015.
Iranian Oil Minister Bijan Namdar Zanganeh told reporters after the meeting that he was “not angry” about the decision, but it was “not in line with what we wanted.”
The opening comment above is the most relevant in my opinion. OPEC’s agreed production ceiling since 2012 has been 30 million barrels a day, but this has been exceeded most months, according to several reports. OPEC’s production will probably increase, unofficially, following today’s meeting, in a desperate search for a little more revenue.
The Saudi’s have no interest in cutting their supply to help rivals. Moreover, their unofficial goal, presumably shared by other countries in today’s closed-door meeting, is to knock back US shale oil production.
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