OPEC shows no signs of slowing oil production
Oil prices fell lower today as OPEC showed no signs of changing its policy of defending market share, which the group started on Thanksgiving Day of last year. U.S. crude benchmark WTI fell below $40 per barrel early today, down more than 2% from its closing price of $41.08 yesterday.
The price of WTI has been moving below $40 and back up throughout the morning. International crude oil benchmark Brent Crude was also down about 1.5% at $43.16 as of 12:45 EST.
Sources inside of OPEC have indicated that the group has agreed to continue its strategy of pumping above its self-imposed 30 MMBOPD ceiling, damping yesterday’s indication that the group’s largest producer, Saudi Arabia, would propose a solution to support oil prices. Iranian Oil Minister Bijan Zanganeh announced that Iran also plans to produce unrestricted, pushing oil prices down further.
“We don’t expect OPEC to do anything,” said Zanganeh. “It seems that the global market will grow demand.”
Despite Zanganeh’s confidence in growing global oil demand, an internal OPEC document suggested group sees the market will remain oversupplied by 700 MBOPD in 2016, reports The Wall Street Journal.
OPEC will likely raise its production ceiling to 31.5 MMBOPD in an acknowledgement of exceeding its current production cap. OPEC’s only Asian member, Indonesia, is also rejoining the group in Vienna at the meeting, bringing with it about 800 MBOPD of production. While the increased production ceiling will more accurately reflect OPEC’s production, it does nothing to alleviate the global supply glut.
Strong dollar adds pressure to oil prices
Further cutting support from oil prices, The U.S. Bureau of Labor Statistics reported stronger than expected job data today. The BLS reported 211,000 jobs added to the U.S. economy in November, indicating that the Fed may soon raise interest rates.
The strong jobs data pushed the value of the dollar higher after it had slipped against the Euro earlier this week. The higher value of the U.S. currency increases the cost of purchasing dollar-denominated goods like oil for other countries, further hurting oil’s recovery.