OPEC fails to stabilise crude oil market as price drops further

Minister of State for Petroleum Resources, Emmanuel Ibe Kachikwu

The 168th meeting of the Organization of the Petroleum Exporting Countries ended in Vienna, Austria, on Friday, with a resolution by members to keep production outputs unchanged in a bid to ensure long-term stable and balanced oil market for both producers and consumers.

The meeting presided over by Nigeria’s Minister of State for Petroleum Resources, Ibe Kachikwu, the group opted to delay the decision to raise its output ceiling from 30 million to 31.5 million barrels per day till next meeting in June.

OPEC will maintain production at current levels and refrain from setting an official output target, a continuation of the Saudi Arabia-led policy that has driven prices to a six-year low.

“OPEC will wait until its next meeting in June to confirm its output target,” the group’s Secretary General, Abdalla El-Badri, said at the end of the meeting.

Saudi Arabia, considered the most influential of the leading members of the group, has spearheaded the campaign against increased supply as a way of firming up crude oil prices, which crashed to $37.89 per barrel on Thursday, from $38.46 the previous day.

Continued drop in crude oil prices has negatively impacted the economies of most of the members like Nigeria, which depends on oil exports as the main source of revenue.

During the meeting, members reviewed the oil market outlook for 2015, with global economic growth currently at 3.1 per cent, while the projections for 2016 revealed demand expansion by 3.4 per cent.

In terms of supply and demand, the Secretariat report showed that non-OPEC supply was expected to contract in 2016, while global demand is anticipated to expand again by 1.3 million barrels per day.

In view of this, and emphasizing its commitment in 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.

On his part, Mr. Kachikwu, who headed Nigeria’s delegation to the meeting, said a more balanced market could be achieved if demand for OPEC crude was increased by 1.2 million barrels per.

In his address at the conference, Mr. Kachikwu said a balanced and stable market would be of crucial importance in the years ahead to ensure continued investment in the industry.

He said the conference was determined to enhance market stability to the benefit both consumers and producers and contribute to global economic growth.

“Dialogue and collaboration with consumers, non-OPEC producers, oil companies and investors are essential in reaching our common goal of a more orderly oil market,” Mr. Kachikwu said.

He stressed the need for continuous dialogue, citing the positive examples between OPEC and non-OPEC countries and the Asian Ministerial Energy Roundtable held in Qatar in November.

World oil demand in 2015, he disclosed, grew by 1.5 million barrels per day, up from one million barrels per day in 2014.

“Next year, we foresee growth of 1.3 million barrels per day to average 94.1 million barrels per day, with most of this growth coming from non-OECD countries,” he noted.

“As far as supply is concerned, non-OPEC countries would continue to see significant reduced production growth as compared to past years. In fact, in 2016, we anticipate a contraction in non-OPEC oil supply,” he said.

The downward trend, the minister explained, stemmed mainly from the impact of investment cutbacks and the drop in U.S. tight oil output, which has been declining steadily since May 2015.

The impact on investment, Mr. Kachikwu pointed out, was clearly illustrated by the drop in the number of newly oil wells drilled as well as the reduction by half of active drilling wells.

He maintained that OPEC remained committed to protecting the environment and supporting sustainable development, adding that member of the group were participating in the climate change negotiations in Paris with the goal of “full, effective and sustained implementation of the United Nations Framework Convention on Climate Change.”

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