VIENNA: The Organization of Petroleum Exporting Countries (OPEC) oil producers cartel meets in Vienna on Thursday for a pivotal decision on whether to reduce the amount of oil it produces, faced with a global supply glut that has massively depressed crude prices.
The price of US benchmark oil fell to a four-year low Wednesday on growing expectations that the OPEC will not take significant action in the Austrian capital, home to the 12-nation cartel that pumps out about a third of the world’s crude.
Thursday’s OPEC meeting is the most significant in recent years after crude futures have sunk by more than 30 percent since June on plentiful oil supplies, a strong dollar and worries about stalling energy demand in a weak global economy.
OPEC is under pressure from its poorer members like Venezuela and Ecuador to cut output as tumbling prices have slashed their precious revenues.
However, the cartel’s Gulf members have rejected calls for a cut unless they are guaranteed market share in the highly competitive arena.
OPEC kingpin Saudi Arabia on Wednesday said Gulf nations had reached a consensus over what needed to happen regarding the cartel’s level of supply, adding that it hoped the other members would agree.
“I am confident that OPEC is capable of taking a very unified position,” Saudi Oil Minister Ali al-Naimi told reporters.
OPEC pumped 30.6 million oil barrels per day last month, above its 30 million bpd target according to the International Energy Agency, which advises countries on energy policy.
Some analysts believe that the cartel will on Thursday agree to trim such excess rather than cut its official ceiling.
“Traders are skeptical that the cartel’s current production ceiling of 30 million barrels of oil per day will be reduced at this meeting,” said Fawad Razaqzada, an analyst at Forex.com.
“If OPEC were to trim the production limit, it will therefore concede more market share to shale oil producers, so it is not in the best interest of its members in the long term.”
Ahead of the OPEC meeting, the world’s top oil producer Saudi Arabia cut charges for US customers in a move seen as a bid to maintain its market share amid increasing competition from oil extracted from shale rock in the United States.
OPEC has meanwhile insisted that it is not solely up to the cartel to tackle the oversupply that is sending crude prices crashing, in turn benefitting consumers at the petrol pumps but hurting oil companies’ incomes.
Officials from Saudi Arabia met with their counterparts from Venezuela and non-OPEC oil producers Russia and Mexico in Vienna on Tuesday.
Following the surprise gathering, Russian oil giant Rosneft said it had trimmed its daily output by 25,000 barrels because of “market conditions.”
The token reduction represented less than one percent of the behemoth’s total and did nothing to boost energy prices on depressed global commodity markets.
On Wednesday, the price of US oil benchmark West Texas Intermediate for delivery in January fell 40 cents to $73.69 a barrel—its lowest closing price since September 2010.