Opec oil ministers have agreed to keep their production target at 30 million barrels a day, despite an oversupply of crude and plunging prices.
The global price of crude oil fell after the announcement, trading down $2.85 at $74.90 a barrel. As recently as June it was around $115.
The decision in Vienna was mostly expected – Opec oil power Saudi Arabia had indicated before the meeting that it favoured the status quo. The Saudis are the top producers within the 12-nation organisation and effectively decide the cartel’s policy.
Some less well-off members had favoured a cut, to reduce supplies and push prices back up. But because of booming shale production in the US that would not have made a sizeable dent in supply.
The Organisation of the Petroleum Exporting Countries still accounts for a third of the world’s oil sales, but the 32% fall in prices is straining the tenuous image of unity it strives to project.
Analysts say that by opposing an output cut, Saudi Arabia appears to be hoping to drive prices below the level at which shale oil production is economical. That, in theory, would force shale producers – particularly in the US – to cut back, re-establishing Opec’s dominance of the energy market.
Experts say shale oil production turns too costly at the $60 a barrel level.
That means that if the Saudi strategy works, consumers would benefit in the short run – and Opec over the longer term once prices rise.