The Opec cartel is to continue flooding the world with crude oil despite a chronic glut and the desperate plight of its own members, demanding that Russia, Kazakhstan and other producers join forces before there can be output cuts.
Brent prices tumbled almost $2 a barrel to $42.90 as traders tried to make sense of the fractious Opec gathering in Vienna, which ended with no production target and no guidance on policy. It reeked of paralysis.
Prices are poised to test lows last seen at the depths of the financial crisis in early 2009. The shares of oil companies plummeted in London, and US shale drillers went into freefall on Wall Street.
Oil tankers are lined up off the cost of Texas, a flotilla of crude storage across the world Photo: Alamy
‘Lots of people said Opec was dead. Opec itself has just confirmed it,’ said Jamie Webster, head of HIS Energy.
Venezuela’s oil minister, Eulogio del Pino, pushed for a cut in output of 1.5m barrels a day (b/d) to clear the market, describing the failure to act as calamitous. ‘We are really worried,’ he said.
Abdallah Salem el-Badri, Opec’s chief, conceded that the cartel’s strategy has been reduced to an impotent waiting game, hoping that the pain of low prices will lure Russia and other global producers to the table. ‘We are looking for negotiations with non-Opec, and trying to reach a collective effort,’ he said.
Mr el-Badri said there have been ‘positive’ noises from some but none is yet ready to lock arms and create a sort of super-Opec, able to dictate prices. ‘Everybody is trying to digest how they can do it,’ he said
This post was published at David Stockmans Contra Corner on December 6, 2015.