Brent crude prices fall to $42 after OPEC meeting ended in disagreement over production cuts
Oil prices fell to their lowest in nearly seven years on Monday after OPEC's meeting ended in disagreement over production cuts and without a reference to its output ceiling, while a stronger dollar made it more expensive to hold crude positions.
The Organization of the Petroleum Exporting Countries (OPEC) ended its policy meeting on Friday without agreeing to lower production.
For the first time in decades, oil ministers dropped any reference to the group's output ceiling, highlighting disagreement among members about how to accommodate Iranian barrels once Western sanctions are lifted.
"A stronger dollar and the aftershock of Friday's OPEC meeting are weighing on the oil market," said Tamas Varga, oil analyst at brokerage PVM Oil Associates in London.
Brent crude prices, the globally traded benchmark, traded down 82 cents at $42.18 a barrel at 1334 GMT and touched a low of $42.11, the lowest since March 12, 2009. US crude was down $1.12 at $38.85 a barrel, a drop of nearly 3 percent.
The dollar was up against a basket of currencies.
Analysts at Barclays said the lack of an OPEC production target in its written announcement was a sign of discord.
"Past communiques have at least included statements to adhere, strictly adhere, or maintain output in line with the production target. This one glaringly did not," they said.
OPEC's output of more than 30 million barrels per day (bpd) has compounded an oil glut, pushing production 0.5 million to 2 million bpd beyond demand and putting many producers under pressure, especially small-sized US shale drillers that have piled up large amounts of debt.
Analysts at Commerzbank said any recovery in prices would be dictated not by OPEC but by rising demand and a fall in production outside of the group.
"Rising oil prices next year will not depend on OPEC reaching immediate agreement or on a return to price control, as we expect prices to increase primarily on the back of continued robust demand growth and a decline in non-OPEC oil production," they said in a report.
Saudi Arabia, the world's biggest oil exporter, is banking on producers of unconventional oil buckling for output to fall.
Saudi Aramco Chief Executive Amin Nasser said at a conference in Doha on Monday that he hoped to see oil prices adjust at the beginning of next year as unconventional oil supplies start to decline.
In a sign that US production could dip, Baker Hughes' November data showed US rig count numbers were down by 31 month on month to 760 rigs.
Others disagreed. Patrick Pouyanne, CEO of French oil company Total, said at the same event that he did not expect prices to recover next year as production growth was set to outstrip a rise in demand.
"It is not unreasonable to assume that downward pressure on prices will remain for the foreseeable future, as it will take time for low prices to materially scale back production," Cenkos Securities analyts said.
In a sign that investors expect prices to remain weak for years to come, WTI forward contracts out to 2024 have dropped below $60 a barrel.