NEW YORK, Dec. 10 (UPI) — Expectations from OPEC of tepid economic recovery next year added downward pressure to oil prices, pushing Brent back below the $40 mark early Thursday.
Ministers from the Organization of Petroleum Exporting Countries left their regular policy meeting last week in Vienna with few concrete objectives regarding production policies. Wealthier member states like Saudi Arabia are standing pat on output, arguing levels needed to remain robust to meet expected demand from the growing economies of Asia.
In its monthly report for December, OPEC said there were signs of stimulus in the U.S. economy, though those were largely balanced by ineffective stimulus policies in Europe and Asia. China, however, has “achieved some success” in stabilizing its economic trajectory.
“The development of monetary policies will remain an influential factor in the coming year, including for the oil market,” OPEC’s report read. “In 2016, the global economy is forecast to grow by 3.4 percent, with the growth risk slightly skewed to the downside.”
The uncertainty helped push crude oil prices lower in early Thursday trading. Brent crude oil moved down by about 0.6 percent at the opening bell in New York to $39.87 per barrel, close to the lowest level in recent years. West Texas Intermediate, the U.S. benchmark price for crude oil, was down 0.6 percent to $36.93 per barrel.
Lower crude oil prices are eating away at the pocketbooks of oil companies. U.S. supermajors Chevron and ConocoPhillips each rolled out 2016 budget plans that call for more than 20 percent cuts in overall spending. Conoco Chairman and Chief Executive Officer Ryan Lance said the market outlook “remains challenging.”
OPEC said it saw production from non-member states faltering in 2016 under the strains of the current market environment. Of the seven shale basins in the United States that contributed to nearly all of the recent growth, only two – the Permian basin in Texas and the eastern Utica area – are expected to experience growth in January.
OPEC said it needed to keep production steady as non-member state levels decline. In its latest report, however, it suggested the energy market was still weighted toward the supply side.
“Oil markets have been dogged by oversupply, with an estimated 1.8 million bpd above demand being produced,” it said.
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