OPEC is not in control.
For the second time in a week, OPEC officials intimated that the recent collapse in the price of oil is not related to OPEC’s actions or a fundamentally sound market.
Speaking at an event in Dubai on Sunday, the secretary-general of the Organisation of the Petroleum Exporting Countries, Abdullah al-Badri, said the price of oil had fallen further than market fundamentals would have dictated, reports Reuters.
“The fundamentals should not lead to this dramatic reduction (in price),” al-Badri said, according to Reuters.
Earlier this week, Saudi oil minister Ali Al-Naimi told Bloomberg, “Why should I cut production? You know what a market does for any commodity. It goes up and down and up and down.”
But as Business Insider’s Shane Ferro wrote last Wednesday: “The whole point of OPEC is to use collective action, through tightly controlling the world’s oil supply, to counteract the market forces that Al-Naimi is now saying should be allowed to move freely.”
Al-Badri added in his comments to Reuters on Sunday that OPEC’s decision in November to maintain its current production target was not aimed at anyone specifically.
“Some people say this decision was directed at the United States and shale oil. All of this is incorrect. Some also say it was directed at Iran. And Russia. This also is incorrect,” al-Badri said.
And according to The Wall Street Journal’s account of al-Badri’s comments, al-Badri there is “no target price” that OPEC seeks for oil.
Some commentators, including The Economist, have speculated that OPEC’s decision not to curb production amid tumbling oil prices was an effort to pressure US shale oil producers who have ramped up production significantly in the last few years.
In the first week of December, US weekly oil production came in at its highest level since 1986.
On Friday, West Texas Intermediate crude oil settled at around $US58 a barrel, while Brent crude oil was near $US62, both five-year lows.
According to Bloomberg, United Arab Emirates energy minister Suhail Al-Mazrouei said at the same conference in Dubai that, “We are not going to change our minds because the prices went to $US60 or to $US40 … the market will stabilise itself.”
Here’s what the market has done to oil this year.
(Reuters reporting by William Maclean; writing by David French, editing by John Stonestreet)
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