VIENNA: Organization of Petroleum Exporting Countries (OPEC) headed toward holding its crude output levels steady at its Friday production meeting, sending oil prices sliding under $59 on concerns of global oversupply.
Ministers attending a two-day OPEC seminar before the output gathering said on Thursday (Friday in Manila) they would be happier with prices between $75 and $80 a barrel to boost precious revenues and help balance their budgets.
However, US benchmark West Texas Intermediate for delivery in July delivery dived $1.30 to $58.34 a barrel, as the market was plagued by stubborn fears over the supply glut.
Brent North Sea crude for July shed $1.50 to stand at $62.30 a barrel in late afternoon London deals on Thursday.
“We are still surviving—it’s not the situation we prefer of course. It all depends on the second half now for oil prices,” Kuwaiti Oil Minister Ali al-Omair told reporters at the seminar in Vienna’s Hofburg Palace.
Asked if he was pleased with the current state of the market, Omair replied: “It is improving of course.”
He added: “If the price does not rise to $77 a barrel, then the Kuwaiti budget will in deficit.”
Angola, Ecuador, Iran, Iraq and Venezuela have all appealed for a fair price for crude this week, but Saudi Arabia has expressed contentment with OPEC’s strategy.
The OPEC, whose dozen members pump one third of the world’s crude, is still seeking to curb shale and deep-water oil producers that need high prices to make their operations profitable.
Oil price collapse
World oil prices tumbled between June 2014 and January on the back of faltering global energy demand and growing oversupply—which many observers regard as being fuelled by booming US shale oil output.
At OPEC’s last meeting in November, the cartel held its daily official production target at 30 million barrels per day (bpd), where it has now stood for around three and a half years.
That decision initially contributed to prices slumping to six-year lows, but some analysts say the strategy, backed by OPEC kingpin Saudi Arabia, has paid off as US shale oil producers have been squeezed and crude has recovered somewhat in recent months.
Oil ministers also argue that the improved economic outlook has since helped prices bounce back.
Qatar’s Energy Minister Mohammed Al-Sada noted Thursday that the market faced “depressed economic conditions of 2014” but added that “the world economy is expected to improve in 2015.”
Despite the collective target, OPEC is actually producing about 31.21 million bpd according to International Energy Agency data, due to extra supplies from Saudi Arabia and also Iraq which has ramped up output in southern and northern areas not hit by Islamic State jihadists.
Analysts fear the market could be further saturated with oil from Iran, after the Islamic Republic reaches a nuclear energy deal with world powers.
Tehran’s Oil Minister Bijan Zanganeh indicated Wednesday in Vienna that Iran could pump an extra one million barrels within six to seven months of Western sanctions eventually being lifted.
OPEC insisted Wednesday that it welcomed all unconventional oil producers, adding that they help balance the global market.
SEB commodities analyst Bjarne Schieldrop told Agence France-Presse that OPEC should lift its target to 35 million bpd to dispel confusion over its actual output.
“It would give a very clear message of what they are already saying and doing: OPEC should not be the one to reduce production,” he said.
“We know that Saudi Arabia needs to increase exports and revenue in order to compensate for lost income with the lower price.
“We know Iran and Iraq will increase production and we know Libya will eventually come back into market. It easily adds up to 35 million bpd.”