Controversy has continued to trail the current decision of Organisation of Oil Exporting Countries, OPEC to increase its collective output to 31.5 million barrels per day, despite crude oil prices dropping to a seven-year-low, now hovering around $40 a barrel.
Brent crude fell by 3.4 per cent to below $36.70 a barrel for the first time since December 2008 and U.S. West Texas Intermediate (WTI) sank 2.5 per cent below $34.70 a barrel.
Brent traded less than 50 cents above the lows last seen during the 2008 financial crisis of $36.20 a barrel. “Oil is coming under pressure as the lack of OPEC cuts mean incessant oversupply continues,’’ said Amrita Sen from Energy Aspects think tank.
Both benchmarks have fallen every day since the Organization on Dec. 4 abandoned its output ceiling. In the past six sessions, they have shed more than 13 per cent each. OPEC has been pumping near record levels since last year in an attempt to drive higher-cost producers such as U.S. shale firms out of the market.
New supply is likely to hit the market early next year as OPEC member Iran ramps up production once sanctions are lifted as expected following the July agreement on its disputed nuclear programme. “All new production will be earmarked for exports,’’ BMI Research said in a note.
“In addition to volumes released from storage, Iran will be able to increase crude oil and condensates exports by a maximum of 700,000 b/d by end-2016,’’ it said. Gulf producers and Russia have said they would not cut output even if prices fell to $20 per barrel.
On Friday, the International Energy Agency, IEA, said that the global supply glut was likely to deepen next year and put more pressure on prices. OPEC supply is likely to increase by 1 million bpd next year, Morgan Stanley analysts said in a research note on Monday. “Almost the entirety of added supplies in 2016 will come from Iran, Iraq and Saudi,’’ it said.
Made up of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela, the oil cartel has been supplying an already oversupplied market with cheap oil – with all of its members now feeling the pinch.
But countries such as Venezuela have been the hardest hit. With 95 percent of its income from oil, Venezuela is witnessing its worst recession since the 1940s, and the economy is expected to shrink by 10 percent this year.
Venezuela wants OPEC to change its policy but influential players like Saudi Arabia are insisting on keeping production levels high, because they don’t want to lose customers to non-OPEC producers like the United States.
US oil and shale gas production has been expanding in recent years, and with reduced domestic fuel demand this could lead to less reliance on crude imports and a lifting of its oil export ban. Oil prices fell for a seventh straight session on Monday, coming close to 11-year lows, on growing fears that the global oil glut would worsen in the months to come.
…Kachikwu calls for co-operation among African oil producers
Meanwhile, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu has called on member countries of the African Petroleum Producers Association, APPA, to close ranks and bring their influence to bear on the global oil and gas production matrix.
Speaking at a media briefing to herald the forthcoming 6th Africa Petroleum Congress and Exhibition (CAPE Vl) billed for Abuja from 15th – 17th March, 2016, Dr. Kachikwu stated that it was high time APPA members rallied round to forge common positions on critical areas of mutual interest to galvanize their stakes, especially in the Organization of Petroleum Exporting Countries, OPEC.
The African Petroleum Producers Association APPA was founded at the instance of Nigeria at a meeting held in Lagos in January 1987 with eight African countries Algeria, Angola, Benin, Cameroun, Congo, Gabon, Libya and Nigeria in attendance. It was formed to serve as a cooperative framework for the promotion of common initiatives and projects related to management policies and strategies in all areas of the petroleum industry of the oil producing countries in Africa.
Its key objectives include: Promotion of cooperation among member countries in hydrocarbon exploration, production, refining, petro-chemicals, manpower development, acquisition and adaptation of technology and legal matters; promotion of technical assistance among member countries in the areas in which individual members have acquired valuable experience among others.
APPA membership has since grown from the initial eight to 18 countries. The other members are: Chad, Cote d’Ivoire, democratic Republic of Congo, Egypt, Equatorial Guinea, Ghana, Mauritania, Niger, South Africa, and Sudan.
The ascendency of Nigeria’s Petroleum Resources Minister as President of APPA, brings to three his headship of top global oil and gas organizations. Kachikwu holds sway as President of the Organization of Petroleum Exporting Countries, OPEC Conference and is also President of the Gas Exporting Countries Forum, Ministerial Conference which held in November in Tehran, Iran.