Business
OPEC agreed on Friday to keep oil output high, at 30 million barrels per day. In effect, that means a license for both OPEC and non-OPEC producers to increase output as they see fit, notes Bloomberg View. Saudi Arabia intends to continue its price war on U.S. shale that was interrupted by the recent speculative upswing in crude prices. Oil prices plummeted last year after OPEC, led by the Saudis, refused to cut output in response to a global glut. That has already cost the oil industry about 100,000 jobs and as much as $1 trillion in scrapped investment projects.
Yet the main players have only increased output. In April, according to the International Energy Agency, OPEC supply was at 31.2 million barrels a day, the highest since September 2012. That was the 12th consecutive month that OPEC production was above the official 30 million barrel limit, and Saudi Arabia was pumping as fast as it could, keeping its output above 10 million barrels a day. Its enthusiasm was, however, surpassed by the biggest non-OPEC oil power, Russia. In May, it extracted 10.7 million barrels per day, compared with the Saudis' 10.2 million. It was the first time Russia took the global lead since 2010. The U.S. oil industry, too, did its best to show it was not intimidated. In May, it produced an average of 9.4 million barrels of crude per day, 2.7 percent more than in January and the most since 1972.
Friday's decision defers discussion of several tricky questions set to arise in the coming months as members such as Iran and Libya prepare to reopen the taps after years of diminished production, writes Reuters. Iranian oil minister Bijan Zanganeh had promised to press the group for assurances that other members would give Tehran room to add as much as 1 million barrels per day (bpd) of supply once Western sanctions are eased. But most delegates saw little reason for Tehran to pick a fight now.
The Financial Times reports that OPEC's decision in November to abandon its traditional role of bolstering prices through production cuts and instead defend market share upended the oil market and altered the energy landscape. Budgets of exporter countries have taken a hit while $100bn of spending on new global oil projects has been put on hold or cut by the world’s largest energy groups.
