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SHEL Shell Plc

2,625.50
12.50 (0.48%)
Last Updated: 13:59:10
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Shell Plc LSE:SHEL London Ordinary Share GB00BP6MXD84 ORD EUR0.07
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  12.50 0.48% 2,625.50 2,625.50 2,626.00 2,636.50 2,613.00 2,624.00 4,251,627 13:59:10
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Crude Petroleum & Natural Gs 316.62B 19.36B 2.9804 8.80 170.45B

OPEC Leaves Production Target Unchanged -- Update

27/11/2014 4:25pm

Dow Jones News


Shell (LSE:SHEL)
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By Benoît Faucon, Summer Said, Sarah Kent and Nicole Lundeen 

VIENNA--OPEC members agreed on Thursday to stick to the oil-producer group's existing output target--a move that would require modest cuts in production but which stops well short of the stronger action some members had called for to bolster prices.

The oil producer group's decision led to a further sharp selloff in major global oil benchmarks, with U.S. markets closed for the Thanksgiving holiday. Brent crude fell 3.9% to $74.71, a four-year low, while the West Texas Intermediate benchmark was down 3.2% to $71.36 a barrel. Currencies of countries that are major oil producers slid, with the Canadian dollar down 0.4% against the U.S. dollar and the Russian ruble off 0.4% against the euro. Share prices of major oil companies also fell, with Royal Dutch Shell PLC down 3%, Total SA off 2.9% and BP falling 2%.

The Organization of the Petroleum Exporting Countries said its 12 members, who collectively pump around one-third of the world's oil, would comply with its current production ceiling of 30 million barrels a day. That would involve a supply cut of around 300,000 barrels a day based on the cartel's output in October.

"In the interest of restoring market equilibrium, the conference decided to maintain the production level of 30 million barrels a day, as was agreed in December 2011," OPEC said in a statement.

That isn't enough to meaningfully reduce the imbalances in global oil markets, caused largely by a number of new oil supply from the U.S. and weaker global demand growth. Analysts have estimated OPEC would need to take 1 million to 1.5 million barrels a day off the market to support oil prices, which have fallen by more than 30% since the summer.

The absence of stronger action from OPEC makes a rebound in oil prices less probable, likely putting more strain on oil producing countries which became used to oil prices above $100 a barrel for much of the time since early 2011.

Of OPEC's members, only Qatar and Kuwait will be able to balance their budgets next year with prices at their current level. Non-OPEC countries that produce a lot of oil such as Russia and even wealthy Norway have suffered through oil's recent fall too.

But the drop in prices has helped consumers in developed countries such as the U.S., where gasoline usage remains high. Industrialized oil-consuming countries have long criticized OPEC as acting to keep crude prices high to line OPEC governments' coffers.

It remains unclear how OPEC will now enforce its own production limit, which it has often failed to adhere to previously.

OPEC's decision to roll over its production target is a compromise solution designed to meet the conflicting pressures on its members. While most OPEC countries want to see global oil supply reduced to help boost prices, individual members have been unwilling to cut their own production for fear of losing crucial oil-related income and market share.

Another problem for OPEC is that if it were to cut production sharply, resulting higher oil prices might only help incentivize yet more production from U.S. shale oil leading OPEC to lose more of its share of global markets.

Saudi Arabia, OPEC's biggest producer and de facto leader, hasn't wanted to cut its own output without securing a commitment from its fellow cartel members that they would reduce supply too. The kingdom itself has been beset by an unusual level of internal conflict in recent months, with longtime oil minister Ali al-Naimi criticized for his lack of firmer action behind closed doors.

Ahead of the OPEC meeting Thursday, the normally voluble Mr. al-Naimi told reporters to "Go away please."

Though OPEC has been through periods of intense infighting before during its more-than five decade history, longtime observers say the group has rarely been as divided as during the weeks running up to Thursday's meeting.

Some poorer OPEC countries had called for sharp production cuts. Venezuela's representative, its Foreign Minister Rafael Ramirez, said earlier Thursday that global oil oversupply had reached "2 million barrels a day" and that he wanted it "out of the market." Venezuela will need oil prices to average around $117.50 a barrel next year for its government budget to break even, according to Deutsche Bank.

Josie Cox contributed to this article.

Write to Benoît Faucon at benoit.faucon@wsj.com, Summer Said at summer.said@wsj.com, Sarah Kent at sarah.kent@wsj.com and Nicole Lundeen at nicole.lundeen@wsj.com

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