London (AFP) – Global oil prices plunged Friday to yet another four-year low after the OPEC oil producing cartel decided to maintain crude output in an oversupplied market, dealers said.
London Brent oil for January delivery sank in early deals to $71.12 per barrel — the lowest level since July 7, 2010.
U.S. benchmark West Texas Intermediate for January sank to $69.29 a barrel in opening trade on the New York Mercantile Exchange, down $4.40 from Wednesday’s closing price.
The NYMEX was closed Thursday for a holiday, but in electronic trading WTI had slumped as low as $67.75.
The 12-nation Organization of Petroleum Exporting Countries (OPEC) opted Thursday to maintain its collective output ceiling at 30 million barrels per day, where it has stood for three years, sending prices plunging.
OPEC refused to cut production despite oversupply that has sent prices tumbling by more than a third since June, with analysts warning of further falls to come.
“As expected, OPEC confirmed what many market participants had expected by leaving their official production quota unchanged,” said Sucden analyst Kash Kamal.
“Many investors had hoped for some positive steps forward as the global supply glut continues to exert considerable downward pressure on futures prices,” he added.
At Thursday’s OPEC gathering in Vienna, the cartel came under pressure from its poorer members, including Venezuela and Ecuador, to trim production as tumbling prices were eating into revenues and raising fears over their economies.
However, the group’s powerful Gulf members led by kingpin Saudi Arabia resisted the calls to turn down the taps unless they are guaranteed market share, particularly in the United States, where cheap shale gas has contributed to the global supply glut.
Another member, Kuwait, supported the move with the country’s oil minister Ali Omair saying: “We decided that price will adjust itself based on supply and demand and that OPEC is supposed to safeguard its market share in order not to lose its clients.”
He suggested the United States should also bear responsibility and lower its own output of shale oil.
Venezuelan President Nicolas Maduro declared Thursday that he would keep pushing OPEC to slash output.
The oil market has plunged in recent months, depressed by plentiful supplies, the stronger dollar and demand fears in a weakening global economy.
“OPEC’s decision to keep output is the main reason for prices to drop quite rapidly,” said Daniel Ang, an investment analyst with Phillip Futures in Singapore.
“Prices are likely to be going down for the rest of the year,” he told AFP.
Ang, who closely tracks the oil market, said he expects WTI to end 2014 in the “low 60s” and Brent in the “mid-60s”.
This week’s OPEC decision was meanwhile perceived by some analysts as an attack on the booming U.S. shale energy sector.
“OPEC is dominated by Saudi Arabia and Kuwait, who also have the highest tolerance for low oil prices due to the economies of scale generated by their huge super fields,” said analyst Nick Campbell at consultancy Inspired Energy.
“Therefore, in order to combat low demand and a new supply threat — both mainly in the United States — the trick is to drop your price.”
Technological innovations have unlocked shale resources in North America and raised daily U.S. oil output by more than 40 percent since 2006, but at a production cost which can be three or four times that of extracting Middle Eastern oil.
“U.S. shale producers costs are estimated to be much higher than most OPEC producers and, therefore, by pushing the oil price lower they are hoping to drive the higher cost current producing wells to the margin and, more importantly, stop new sites developing,” added Campbell.
U.S. oil output is soaring thanks to shale energy, which involves blasting a high-pressure blend of water, sand and chemicals deep underground in order to release hydrocarbons trapped between layers of rock.
AFP Photo/Karen Bleier