VIENNA (AP) - Faced with low prices and plentiful supply, OPEC oil ministers are pondering ways to turn the market around - but may lack options to do so.
VIENNA (AP) — Faced with low prices and plentiful supply, OPEC oil ministers are pondering ways to turn the market around — but may lack options to do so.
The 12-nation Organization of the Petroleum Exporting countries began meeting Friday with prices of U.S. benchmark crude up marginally but still just above $40, near the lows of the world economic crisis seven years ago.
OPEC has in the past cut output to crimp supply and drive up prices. But cutting production levels might not give a lasting boost, with non-OPEC countries like Russia and the United States still going strong.
Additionally, some OPEC members already are selling at a loss and so cutting now would further hurt them financially.
Instead, OPEC output may go up. Sanctions on Iranian oil sales are about to end, Indonesia is about to be reinstated as a member and Iraq's production is coming back strongly after years of conflict.
As the meeting convened, conference president Emmanuel Ibe Kachikwu described the oil industry as "in the midst of another challenging cycle."
That means that the ministers will likely maintain OPEC's official output level of 30 million barrels a day, pay lip service to cutting back on overproduction and wait for better times.
Iran's resurgence is a major development. Senior oil official Amir Hossein Zamaninia said last week his country hopes to bring an extra 500,000 barrels on the market by early next year. He said he hopes the extra output will be accommodated within OPEC's formal ceiling of 30 million barrels a day.
Arriving for Friday's meeting, Iranian oil minister Bijan Namdar Zanganeh said Iran is ready to discuss a ceiling for its production — but only after his country makes a "full return to the market."
But Iran's hopes of a cutback from others for now are unlikely to be fulfilled. Ahead of Friday's meeting, OPEC already was churning out well over than 31 million barrels a day and OPEC members are likely to continue producing more than their share as they push to compensate for low prices by increasing output.
Some of those extra barrels will likely come from Iraq. The world's fastest-growing source of crude this year, it was pumping more than 4 million barrels a day last month and was responsible for last month's biggest monthly rise in output among all OPEC countries.
These trends mean that the pressure is on Saudi Arabia, which accounts for about a third of OPEC's output, to cut back.
Saudi opposition to a cut in OPEC output a year ago was calculated to put higher-cost outside competitors — such as U.S. shale oil producers — out of business, in the hope that would eventually lead to a drop in supply and a rebound in prices. That strategy clearly hasn't worked, with benchmark U.S. crude's value falling by more than 40 percent over the past year and now hovering around the $41 mark per barrel.
Cushioned by past profits on oil, the Saudis can hold out, even if production costs exceed sale revenues. And the Saudis appear in no mood to make unilateral cuts.
"Saudi Arabia and its closest Gulf allies have made clear ...that they intend to hold firm to their market share-first policy," said analysts from IHS Energy in a research note ahead of the meeting.
Jelena Vicic contributed.