Oil ministers ended their bi-annual OPEC meeting in Vienna last night without any clear signs of any agreement for a future freeze on oil production. The overall sense from ministers, however, was that the relatively laissez faire policy of the last year-and-a-half was showing signs of working..
The lack of agreement over an overall output ceiling reflected the bickering between Saudi Arabia and its market rival Iran who insists on raising production to regain market share lost during years of sanctions, which were lifted in January.
Saudi Arabia’s restraint was seen as a positive step and kept oil prices steady at $50 a barrel early Friday.
According to ANZ bank, "The fact that Saudi Arabia strongly promoted a new higher ceiling sent an important message that it won't open taps to flood oil markets. Overall, this should be seen as a positive for oil prices. When combined with growing disruptions around the world and increasing declines in U.S. output, we see oil prices trending higher over the next six months."
US Output Lower
The most recent data show that oil production in the US is down sharply since last year, although the rate of decline has slowed. Domestic output was more than half a million barrels per day lower than last year, at just above 9.1 million bpd.
In addition, analysts are seeing signs that the formerly booming shale oil sector in the US will undergo a further sharp contraction. More shale companies have filed for bankruptcy protection so far this year than in the whole of last year.
However, there is sure to be larger quantities coming from Iran in the coming months as it continues to remove itself from any effort to restrict its production despite OPEC’s demands. Iran’s oil minister said yesterday that since the deal with western powers in January, production has risen back to near the 4 million bpd level which prevailed before nuclear-related sanctions were imposed in 2012.