It will take more than $40-a-barrel crude to make the Organization of Petroleum Exporting Countries change its mind and adopt a different strategy, analysts said before the group’s Dec. 4 meeting in Vienna.
Over the past year, OPEC has decided to defend its market share and let prices sink. Undeterred, the group will press on with its strategy to batter rival producers when ministers meet next week, according to 30 analysts and traders surveyed by Bloomberg.
“There’s no reason to expect any change of heart,” said Antoine Halff, a senior fellow at the Center on Global Energy Policy at Columbia University. “The strategy is working out; it’s just not solving the problem overnight. The market is rebalancing and there’s pressure on shale oil production, but it will take time.”
Brent Crude, the benchmark for about half the world’s crude, closed as low as $42.69 a barrel in August, the weakest in more than six years.
“Saudi Arabia is the chief architect of OPEC’s new policy, and despite calls by other members to reconsider, we expect them to remain steadfast,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA, in London.
Their “experiment in letting prices bring adjustments to the world’s oil balance has yet to run its course.”
Miswin Mahesh, an analyst at Barclays Plc in London, said raising the production ceiling would only be a formality to incorporate the returning member Iran, without any impact on actual production.
This comes as Iran aims to revive oil exports once sanctions are removed regardless of the impact on prices.
“As OPEC typically only confronts problems when necessary, Iran’s return may not come up for discussion on Dec. 4,” said Mike Wittner, head of oil market research at Societe Generale SA, in New York.
Whittner added that even when Iranian barrels are flowing again, Saudi Arabia will be in no mood to make way for its regional rival.
