OPEC decides to maintain current oil output, sees low prices

VIENNA – OPEC decided to keep its oil output target on hold Friday and predicted prices would remain low for the foreseeable future – good news for both oil-hungry international industries and consumers at the gas pump.

The cartel said its output level would remain at 30 million barrels a day despite the fact that prices were still low compared with a year ago. It left it to member states to restrain any overproduction, an acknowledgment of the cartel’s inability to enforce its own limits as it struggles to control world supply and prices.

With non-OPEC oil-producing countries ready to ramp up production if prices go much above present levels, OPEC’s secretary general said the cost of crude will stay relatively low for a while.

“The reality now is that we cannot have these $100 (prices) anymore,” Abdalla Salem el-Badri told reporters.

The international price of crude was down $1.62 at $62.10 after Friday’s announcement, having traded above $115 a barrel in 2014.

In recent months there has been more than 1 million barrels a day of OPEC production beyond the target. But the likelihood of continued overproduction persists.

OPEC powerhouse Saudi Arabia is fighting to keep market share against U.S. shale oil, Iran plans to increase production in anticipation of an end to sanctions that have crimped its crude exports, and other countries are trying to compensate for low prices by selling more.

“OPEC realizes … that it is now in a highly competitive market, in which its own members will compete against each other and collectively against non-OPEC producers, and in particular shale producers,” said John Hall of Alfa Energy in London.

Announcing the decision to keep the present target, an OPEC statement urged members “to adhere to it.” But el-Badri, the secretary general, acknowledged that, as in the past, countries had only been assigned “indicators” – not quotas – in attempts to hew to the target.

In contrast, Saudi and Iranian comments Friday reflected the countries’ determination to produce what they decide.

“Production policy is a sovereign right,” Ali al-Naimi, the Saudi oil minister, told reporters.

OPEC powerhouse Saudi Arabia and its wealthy Gulf allies are best set to continue all-out producing – even though they, like others, are selling at a loss.

But the less well-off among OPEC states are hurting.

Among them is Algeria, which has long depended on high oil and gas prices to operate an extensive welfare state and has been harshly hit by the shale boom, which generates the same light blend that it sells.

For Venezuela, where crude accounts for 95 percent of all exports, the price slump has hugely exacerbated that country’s economic hardship – the country needs prices above $120 a barrel just to break even.

And Nigeria was forced to trim its 2015 budget by 12 percent because of low crude prices. Oil makes up 75 percent of its exports.