OPEC countries will fail to prevent a supply glut. It is this deep-rooted feeling that is continuing to push oil prices downwards, just on the eve of the meeting in Vienna between the ministers of the cartel. Both benchmarks, West Texas Intermediate and Brent, are hovering around four-year lows and the downward slope was well lubricated yesterday by the failure of the Saudi-Russian talks.
During the meeting, some timid increases had interrupted the decline, which resumed with greater vigor when it became clear that Moscow and Riyadh would not coordinate efforts (read: substantial production cuts) to support quotations. They are always depressed by the boom in shale oil, the crude oil obtained from rocky schists, thanks to which oil extraction in the USA has risen to the highest level in the last thirty years. But even the sluggish demand has helped dampen the optimism of the few who still do not rule out imminent price hikes.
Tomorrow the Vienna summit will perhaps lead to a reduction in the Organization's production ceiling, but it will be necessary to verify whether it will be sufficient to restore the balance between supply and demand and whether it will be respected by the 12 countries adhering to the cartel from which 40% of everything comes world oil. The markets do not expect decisive measures. In fact, in the last few hours, Brent has fallen below 78 dollars per pound and Wti below 74 dollars.
Tehran's oil minister Bijan Namdar Zanganeh also made a statement that could smooth out the friction in the cartel, because Iran, Zanganeh said, will not cut production and will not ask Saudi Arabia to do so. “Our positions – he added – are very close and that's a good thing, because it's important that there is unity within the Organization”. On the front of those who want production reductions, Venezuela would therefore remain, in an isolated position and with little contractual strength.
Russia and Mexico, involved in talks yesterday along with Saudi and Venezuela, will not enter a select committee from which to offer price support. In 2013, the four countries had an average production of 27,8 million barrels per day (mbd), against 30,97 extracted in October by OPEC and 86,8 mbd of the world total. A four-way agreement would have had considerable weight, but it didn't arrive. Indeed, the declarations of Igor Sechin, CEO of the Russian major Rosneft, appeared almost disinterested: "Supply exceeds demand, it is true, but not to a critical extent and cannot cause prolonged price falls". Sechin also seems to accept the hypothesis of ever lower minimums: "a drop below 60 dollars a barrel would not be so tragic for us as to impose an immediate cut in production".
