OPEC disregards glut worry, maintains policy of pumping record volumes

By FXStreet FXStreet (Mumbai) – At its meeting today in Vienna, OPEC maintained its policy of pumping near-record volumes of oil further adding to the already existing glut that has caused oil price to slum in the last one year. The group decided to increase its collective output ceiling to 31.5 million barrels per day (bpd) from the previous 30 million. Clearly, the decision did nothing to attend the growing supply side concern.

Prior to the meeting OPEC had said it would cut output only if other non-OPEC nations followed suit. The non OPEC countries had shown no such interest. As a result, it was largely expected that OPEC would stick to its policy of drilling record volumes to maintain market share.

Why OPEC could not decide to cut output?

International Energy Agency said the oil price plunge since June 2014 that has reduced OPEC revenue by nearly $500 billion a year is the result of excessive pumping. The loss in revenue was hurting the less opulent OPEC members whose export income was being hurt by declining prices. These poorer countries had created pressure on wealthier OPEC members, led by Saudi Arabia, to lower output. Saudi Arabia has refused to budge. Riyadh and its …read more

Source:: FX Street