Oil Prices Slip Ahead of OPEC Meeting In Vienna

Oil prices slipped on Thursday ahead of
a key Organization of the Petroleum
Exporting Countries (OPEC) meeting to
decide production policy at a time of
huge global oversupply.
OPEC is expected on Friday to keep a
group output target of 30 million barrels
per day (bpd), a ceiling it has been
exceeding for most of the last two years,
weakening prices.
The cartel is now pumping about 2
million bpd more than needed, analysts
say.
Analysts say the oversupply has brought
a glut that has left millions of barrels
stored on tankers without a buyer and
kept prices at close to half their peak
levels in 2014.
Brent for July LCOc1 was down 55 cents
at $63.25 a barrel while the U.S. crude
futures CLc1 were 45 cents lower at
$59.19.
“A roll-over in OPEC’s production target
is built into prices,” said Tamas Varga,
oil analyst at London brokerage PVM Oil
Associates.
“Given the exciting fundamental
backdrop, volatility is all but
guaranteed.”
Energy advisers Wood Mackenzie echoed
the views of many analysts, saying it was
unlikely OPEC would agree to cut output
and the group’s crude output was likely
to stay above its 30 million bpd
production ceiling through 2016.
Wood Mackenzie expects Brent to
average $60 a barrel in 2015 and $70 in
2016.
But IHS Energy said it expected no
reversal of the producer group’s policy
of keeping production high in defence of
market share instead of cutting output to
support prices.
“Although surprises from OPEC can
never be ruled out, prospects for a policy
reversal at this time range from slim to
non-existent.
“Saudi Arabia and its Gulf allies, which
last November instigated the policy of
defending market share instead of
prices, appear resolved to persist with
it,” said Bhushan Bahree, senior director
at IHS Energy.
Strong global fuel demand has helped
support oil prices in spite of the glut.
In China, almost 2 million new cars are
sold every month despite its economic
slowdown.
Demand is also strong in Europe.
Reuters/NAN
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