OPEC’s Strategy Is Working According To Cartel’s Latest Report
The cartel’s Monthly Market Report, published Thursday, said its 12 members extracted an average of 31.38 million barrels of oil per day last month, down by 256,000 barrels per day in September because of export delays in Iraq and lower production in both Saudi Arabia and Kuwait.
As for next year, the report said low prices are prompting energy companies not affiliated with OPEC to pare back on capital expenses by nearly $200 billion. As a result, non-OPEC output in 2016 will fall by an average of around 130,000 barrels per day, “a gaping supply hole” compared with the average growth of 720,000 barrels per day in 2015.
Related: Oil Tankers Are Filling Up As Global Storage Space Runs Low
The report on OPEC’s production decline comes less than a month before the cartel meets on Dec. 4 at its headquarters in Vienna. Some producers have been calling for the group to abandon its price war with rival producers, particularly in the United States, and bolster the price of oil, which has fallen from more than $110 per barrel in June 2014 to below $50 per barrel today.
Yet the report supports the opposing view: that the strategy, masterminded by Saudi Oil Minister Ali al-Naimi, is working precisely because OPEC is not only regaining market share it lost to rival producers, but also forcing those producers to extract less oil. Many of them rely on hydraulic fracturing, or fracking, to extract oil from shale, and can’t make a profit with the global price of oil so low.
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