|By Arabian Post Staff| Opec’s ability to control the oil market suffered its worst debacle when the organization failed to agree on a ceiling for production. This meant that Saudi Arabia prevailed over other members to continue the policy of excess production as to force non-OPEC players, such as the US and Russia, out of the market by making their output uneconomical.
“Lots of people said that OPEC was dead; OPEC itself just confirmed it,” Bloomberg quoted Washington-based oil analyst Jamie Webster, as saying outside the Vienna meeting venue.
The ceiling of 30 million barrels a day, in place since 2011 and now abandoned as too rigid, is exception, Bloomberg said. OPEC output has outstripped it for 18 consecutive months, according to data compiled by Bloomberg. Now the organization says it will keep pumping as much as it does now — about 31.5 million barrels a day — effectively endorsing limitless output.
The oversupply has sent the price of Brent, a global oil benchmark, to a six-year low, triggering the worst slump in the energy sector since the 2008 world financial crisis. It’s cut the profits of major oil companies such as Exxon Mobil Corp. and BP Plc in half while crude-rich countries such as Mexico and Russia have watched their currencies plunge and their coffers shrink.
“Effectively, it’s ceilingless,” the report quoted Iranian Oil Minister Bijan Namdar Zanganeh as saying, “Everyone does whatever they want.”
Emmanuel Ibe Kachikwu, the Nigerian minister, reinforced the message, saying the market shouldn’t worry about the “semantics” of targets or real production.
“We aren’t going to go back to a cartel and work against the customers — that time has passed,” said United Arab Emirates Minister Suhail Al Mazrouei.
Most of the market “doesn’t have any ceiling,” Iraqi Oil Minister Adel Abdul Mahdi told reporters. “Americans don’t have any ceiling. Russians don’t have any ceiling. Why should OPEC have a ceiling?”
The prospect of OPEC, which accounts for roughly 40 percent of the world’s oil production, sent crude prices further downward, hovering around $40 a barrel. On June 30, 2014, the price was $105.37 a barrel.
Iran has promised to lift its production to as much as 4 million barrels a day by the end of 2016, up from about 3.3 million barrels a day currently, which means there would be further pressure on the price.