InvestmentsJun 3 2016

Opec fails to set oil output cap

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Opec fails to set oil output cap

At a meeting yesterday (June 2) Opec failed to agree a new output ceiling for the amount of oil produced by member countries.

But the members confirmed their commitment to “a stable and balanced oil market”.

The oil price has continued to climb and Brent crude is now trading at above $50 a barrel, at $50.12 or 0.2 per cent higher.

At the meeting, members discussed that since Opec’s last meeting in December 2015, “crude oil prices have risen by more than 80 per cent, supply and demand is converging and oil and product stock levels in the OECD have recently shown relative moderation. This is testament to the fact that the market is moving through the balancing process”.

The organisation noted it would continue to “closely monitor” developments and will meet again to suggest further measures depending on the prevailing market conditions.

Joshua Mahony, market analyst at IG Group, said there were “no surprises” from the meeting after Opec members agreed to stick to their existing policy.

He added: “It is simply a case of market share for the Saudis, and thus without the agreement from Iran and non-OPEC members, it was always a long shot that the committee would emerge with anything but the status quo. Amid bonds sales, austerity and the Aramco share sell-off, it is clear that the Saudi Kingdom is in a more uncomfortable position than it is used to.

“However, while US production continues to fall and prices rise, the Saudis have temporarily found a sweet spot. The question is how long it will last.”

Opec, which comprises 13 oil-exporting countries, will meet next on November 30 in Vienna, Austria.