Oil extended losses in Asian trade yesterday after the OPEC cartel refused to cut production, despite a global glut that has sent prices slumping to four-year lows, with analysts warning of further falls to come.
US benchmark West Texas Intermediate (WTI) for January delivery was at US$68.08 a barrel in afternoon trade, down US$0.97 from its settle price in electronic trading in New York on Thursday. US floor trading was closed due to the Thanksgiving holiday.
Brent crude for January fell US$0.0131 to US$71.27.
Photo: Reuters
OPEC, which pumps out one-third of the world’s oil, opted to stick by its output target, even after prices have plunged by 35 percent since June.
The 12-nation cartel “decided to maintain the production level of 30 million barrels per day,” where it has stood for three years, it said in a communique after a meeting on Thursday at its headquarters in Vienna.
Oil prices were routed after the decision was announced, with WTI tanking to US$67.75, a level last seen since May 2010, while Brent also plunged to a four-year low of US$71.25.
“OPEC’s decision to keep output is the main reason for prices to drop quite rapidly,” Singapore-based Phillip Futures investment analyst Daniel Ang said.
“Prices are likely to be going down for the rest of the year,” he said.
Ang, who closely tracks the oil market, said he expects WTI to end this year in the “low 60s” and Brent in the “mid-60s.”
At Thursday’s OPEC meeting, the cartel came under pressure from its poorer members, including Venezuela and Ecuador, to trim production as tumbling prices were eating into revenues and raising fears over their economies.
However, the group’s powerful Gulf members, led by kingpin Saudi Arabia, resisted the calls to turn down the taps unless they are guaranteed market share, particularly in the US, where cheap shale gas has contributed to the global supply glut.
Another member, Kuwait, supported the move, with Kuwaiti Minister of Oil Ali Omair saying: “We decided that price will adjust itself based on supply and demand and that OPEC is supposed to safeguard its market share in order not to lose its clients.”
He suggested the US should also bear responsibility and lower its own output of shale oil.
Venezuelan President Nicolas Maduro on Thursday said he would keep pushing OPEC to slash output.
“We have not succeeded yet, but ... we will continue to try until prices return to where they should be, at around US$100 per barrel,” he said in a televised address in his country, which depends on crude exports for nearly all of its hard currency revenues.
Malaysian bank CIMB said a further decline in oil prices means Asian governments were unlikely to raise interest rates soon.
“Expectations of monetary policy tightening now gets further behind the line, as global reduction in inflation could only mean the urgency to hike or tighten monetary conditions becomes less of a concern for emerging Asia policymakers,” it said.
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