OPEC holds oil production quota at 30mbpd, says it will "leave prices to the market"
OPEC has decided to maintain its oil production quota at 30m barrels per day (bpd) in line with market expectations following the conclusion of its meeting in Vienna, Austria on Friday.
The move was widely anticipated and duly factored in by the market following a succession of OPEC oil ministers, especially Middle Eastern members including Kuwait and Saudi Arabia, coming out in favour of maintaining status quo.
Confirming the move, OPEC Secretary General Abdulla Salem el-Badri said: “Member countries had observed the recent build in stocks and the surplus of oil in both OECD and non-OECD countries, which has resulted in stock levels that are well above the five-year average in terms of absolute volumes, indicating that the market is comfortably supplied."
He added that OPEC was acting in the interest of market equilibrium. "OPEC does not have a so-called oil price target, we will leave that to the market. I agree that there are income disparities within OPEC. We have rich oil exporters and poor oil exporters; our decision in November [to hold production] as well as what we have decided today is in the interest of all members."
To the surprise of many analysts, El-Badri seemed to imply that the production ceiling was not set in stone, but rather a guidance members were expected to adhere to. "It is not a quota as such, but rather a recommendation given to members which we expect them to take."
The decision follows OPEC's official acknowledgement earlier in the year that it was indeed pumping well in excess of 30m bpd. A report in April put the figure at 30.93m bpd, while recent surveys seem to suggest production was close to 31.5m bpd.
The cartel is forecasting world oil demand to increase in the second half of 2015 and in 2016, with growth driven by non-OECD countries. On the supply side, non-OPEC growth in 2015 is expected to be just below 700,000 barrels per day, which is only around one-third of the growth witnessed in 2014.
Analysts expressed little surprise at the decision. Speaking to Sharecast in Vienna, Jason Schenker, President of Prestige Economics, said; "I have always maintained that oil is a story of demand. All things considered, given that demand growth is lower than what was recorded in 2014, OPEC had little incentive to change things, especially as the oil price has recovered from January's lows."
OPEC said it would continue to monitor the market and will convene another ministers' summit on 4 December in Vienna.
At 1726 BST, Brent crude was down 0.56% or 35 cents at $61.68 per barrel.