The price of oil plunged to a fresh four-year low with Opec poised to shy away from production cuts despite a 30 per cent slump in prices since the summer.
Brent crude sank as far as $75.48 a barrel, the lowest since September 2010, as members of the cartel pressing for lower output to prop up prices looked destined for disappointment.
Opec accounts for around a third of global oil sales but is dominated by Saudi Arabia. The Saudis are able to weather lower prices for longer than the likes of Venezuela and Nigeria, which need higher oil prices to support their public finances. Algeria was also said to be in favour of a cut.
Heading into today’s Vienna meeting Venezuela’s foreign minister Rafael Ramirez said the oil market was oversupplied by two million barrels per day, although analysts said Opec was likely to stick to its production ceiling of 20 million barrels a day, while urging members not to overproduce.
John Hall, head of energy consultant Alfa Energy, said: “Opec sees the importance of maintaining market share. There’s a recognition that oil prices have too high for too long. We’ve been in a recession for six years, there’s been demand destruction and they realise that they’re in a competitive world.”
He added that Saudis were “playing a long game” with their willingness to tolerate lower prices as the cartel also wrestles with the advance of alternative energy sources such as shale.
Shale gas becomes less economic to produce as oil prices sink lower. “They hurt Russia, they hurt shale, and they also hurt Iran. The Saudis don’t want Iran to have nuclear power,” he said.
Opec’s next meeting is slated for June although members could call an interim meeting if the crude price continues to fall, Hall added.
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