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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