Oil prices sink as OPEC rejects output cut
Brent crude oil drops to lowest since July 2010 after OPEC decided to leave oil output unchanged
Oil prices sunk to fresh four-year lows on Thursday, with New York crude plunging below $70 a barrel, after OPEC decided against cutting output despite a huge oversupply in world markets.
At about 16:10 GMT, West Texas Intermediate for January delivery struck $69.11 per barrel -- last seen on May 25, 2010. Brent North Sea crude for January hit $72.74, a level last witnessed on July 7, 2010.
Asked whether the oil OPEC had decided not to reduce production, Saudi Arabian Oil Minister Ali al-Naimi told reporters in Vienna: “That is right.”
He was speaking after a five hour meeting of the producer group broke up.
Kuwait’s Oil Minister Ali Saleh al-Omair confirmed the decision, saying there will bot “no change” in OPEC’s oil output.
Oil prices have fallen by more than a third since June as increasing production in North America from shale oil has overwhelmed demand at a time of sluggish global economic growth.
The cartel, whose largest producer and exporter is Saudi Arabia, will meet again in June next year, said an OPEC delegate.
Tariq Zahir, analyst at Tyche Capital Advisors in New York, said and the slide in U.S. crude could continue below $65 a barrel in coming weeks, a factor that may start to challenge the economics of North American shale oil production.
“I really think we will start getting into a price war,” Zahir said. “I think you would be a little crazy to try to pick a bottom here. I expect to see a bounce but any bounce will be sold into.”
He added trading volumes were reasonably strong on Thursday despite many U.S. traders being off for the Thanksgiving holiday.
Oil analysts said the OPEC decision left the oil market vulnerable to much bigger falls as abundant supply of high quality, light crude oil floods world markets, much of it from shale oil in North America.
“Saudi Arabia and OPEC will have to live with a prolonged period of low prices for any dent in U.S.-shale or production levels to happen,” said Harry Tchilinguirian, senior strategist at BNP Paribas in London.
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