OPEC is heading for very tough meeting this week, delegates and officials said on Tuesday, as country members pump record volumes amid an uncertain demand outlook and as the prospects of a U.S. interest rate hike could push oil prices even lower.
“It will be tough,” one OPEC source said, referring to the meeting in Vienna on Friday, which is widely expected by OPEC insiders and watchers to stay the course and roll over existing output policies. Saudi Arabia’s oil minister Ali al-Naimi rebuffed questions after his arrival in Vienna on Tuesday. When asked if Saudi’s strategy of defending its market share is working, Naimi responded with questions: “Which strategy?.. Who said we are keeping market share?” A year ago, Saudi Arabia inspired an OPEC decision to pump more oil and defend market share against surging rival suppliers. The policy has somewhat reduced the pace of the U.S. shale oil boom and non-OPEC supplies are set to decline next year. But it won’t be enough to stop the glut from increasing as non-OPEC Russia and OPEC member Iraq have steeply increased supplies and Iran is due to ramp up deliveries if as expected Western sanctions on the country are lifted next year. Oil prices have more than halved to $45 per barrel from as much as $115 a barrel some 18 months ago. OPEC set for tough meeting, further price fall feared.
A second OPEC source said he expected more downward pressure on oil prices if the United States raised its interest rates in December, helping the dollar to extend gains from its recent peaks. He said oil prices could fall as low as $35 a barrel. OPEC set for tough meeting, further price fall feared.
Several sources pointed to last week’s disagreements over the global demand outlook when OPEC’s experts met in Vienna ahead of the ministerial meeting this week. A third source said OPEC’s traditional price hawks Iran, Algeria and Venezuela as well as more moderate Ecuador and Iraq have questioned the OPEC secretariat’s upbeat demand growth outlook for next year of 1.25 million barrels per day. They said they thought demand growth would in fact amount to just 1 million bpd, a big slowdown from this year when demand growth is expected to exceed 1.7 million bpd. Meanwhile, output from top global producers is showing no sign of abating. Saudi Arabia’s own output edged up in November to 10.25 million bpd despite seasonal patterns which usually reduce demand for crude for domestic burn in winter months. Iraq’s oil exports rose in November to a decades-high average of 3.37 million bpd.
OPEC meets on Dec. 4 and we expect the current status quo to persist. Saudi Arabia is in no mood to cut output, especially as a collective cut remains elusive amidst rising financial stress among other major OPEC and key non-OPEC members,” analysts from Energy Aspect said in a note on Tuesday.
It said it believed Saudi Arabia would only cut production once it could influence the market, which was unlikely before the second half of 2016 given the current high level of inventories.
“Fast forward a year from now and, if our expectations are accurate, stock draws will have begun. Under that circumstance, Saudi Arabia (or OPEC) would only have to reduce production by 0.5 million bpd, or even less, to achieve a similar $30-$40 upswing in prices,” Energy Aspects added.
![TNS Event](https://i.ibb.co/8cBH227/thumbnail-TNS-GOOGLE-RESIZE-300x250.jpg")
