Oil prices fell Thursday after a meeting of the Organisation of Petroleum Exporting Countries (OPEC) and its allies took no decision on deepening supply cuts but focused instead on bringing Nigerian and Iraqi output down to their agreed quotas.
OPEC agreed Thursday to trim oil output by asking over-producing members – Iraq and Nigeria to bring production in line with their targets as the group strives to prevent a glut amid soaring United States production and a slowing global economy.
Crude oil prices also came under further pressure after the European Central Bank cut its deposit rate to a record low -0.5 per cent from -0.4 per cent, saying it will restart bond purchases of 20 billion euros a month from November to prop up eurozone growth.
The price of the global benchmark crude, Brent was down $1.20 at $59.61 per barrel, while the US West Texas Intermediate futures fell 96 cents to $54.79.
Both were heading for the third session of losses, from their 2019 peaks of $75 as fears of a global recession outweigh concerns about falling supply from sanctions-hit Iran and Venezuela.
Saudi Arabia’s new Energy Minister, Prince Abdulaziz bin Salman, said deeper cuts would not be decided before a meeting of the OPEC planned for December.
Abdulaziz said, however, his country would keep cutting by more than it pledged in a deal that has throttled supply by OPEC and its allies by 1.2 million barrels per day.
Nigeria, Iraq and Russia have, at times, produced above their quota.
A statement from OPEC and its allies, a grouping known as OPEC+, said oil stocks in industrial countries remained above the five-year average.
Oil market-monitoring committee formed by OPEC+, met yesterday in Abu Dhabi ahead of their policy discussions in Vienna in December.
Though OPEC+ has over-complied on average with its agreed cut of 1.2 million barrels per day (bpd), some members, such as Iraq and Nigeria, were said to have been producing above their quota.
Iraq, OPEC’s second-largest oil producer, pledged yesterday to reduce output by 175,000 bpd by October, while Nigeria is to reduce supply by 57,000 bpd.
Iraq has been raising its production and exports steeply in recent years, while Iran’s exports have collapsed over the past year because of US sanctions.
Iraq has been pumping 4.8 million bpd in recent months instead of its target of 4.512 million. Nigeria produced 1.84 million bpd in August versus its target of 1.685 million.
OPEC’s de facto leader, Saudi Arabia, will voluntarily overdeliver on its targets and pump just below 10 million bpd, Abdulaziz also said.
He said yesterday’s meeting also discussed rising US shale output and exports, a global economic slowdown and a possible softening of US sanctions on OPEC member Iran.
The Saudi minister added that any formal decision on deeper oil cuts could be taken only at the next OPEC+ meeting in December.
“I can tell you quite frankly that in all deliberations we have discussed all the potential uncertainties as any responsible organisation and we are mindful of them,” Abdulaziz said.
“There is clear readiness to continue to be responsible and responsive.”
He added that the ministerial committee would gather again before the full OPEC meeting in December.
OPEC, Russia and other non-members agreed in December to reduce production by 1.2 million bpd – or 1.2 per cent of global supply – from January 1 this year.
OPEC’s share of the cut, which now runs to March 2020, is 800,000 bpd, delivered by 11 members and exempting Iran, Libya and Venezuela.
Oil prices had tumbled more than two per cent on Wednesday after a report that US President Donald Trump was considering easing sanctions on Iran, which could boost global crude supply at a time of lingering worries about energy demand.
Also feeding the bearish sentiment, the International Energy Agency, which advises industrial economies on energy policy, said surging US output would make balancing the market “daunting” in 2020.