OPEC, the oil producers’ cartel, has decided to leave its production quotas unchanged.
Members meeting in Vienna decided to ignore the huge oversupply on world markets of oil which has seen the price of a barrel fall by 30 percent since the end of June. The news sent an already falling price down another three dollars to 75$ a barrel.
“ We don’t want to panic, I mean it, and also we want to see how the market behaves because the decline of the price does not reflect the fundamental change. This is true as far as we see it here in OPEC,” said Secretary-General Abdalla Salem El-Badri.
In just four months oil has slid down a slippery slope of overproduction, falling demand, and increased competition from non-OPEC sources such as US shale oil. And 2008’s low price has not been tested yet.
“By late December the price had gone down to $36 a barrel. Now, I’m not saying that’s going to happen again, but if it could happen back in 2008, there’s no reason why it can’t happen again in 2014, given that we do have a rapid build-up in supply and very weak demand growth,” said head of analysis at Lloyds List Intelligence, Neil Atkinson.
The decision favours OPEC’s richer members over its poorer ones. Venezuela was visibly angry with unchanged production levels, but the Saudis, among other things, want a weak price to slow US shale oil expansion, which becomes uneconomic if the price falls low enough.