OPEC will have to cut production to maintain prices
Even with OPEC forecast to keep its output quota unchanged at a meeting this week, falling oil demand and prospects for increased supply from some member states mean the group’s leader, Saudi Arabia, will have to cut production anyway.One of the ironies is that the anti energy left is keeping OPEC afloat. For decades they have forced the US to outsource energy production to these regimes by blocking drilling and in the Case of Canada by blocking transportation projects to move their oil to market. They are still blocking drilling in the Western US and in Alaska and in offshore sites on the East and West coasts. They have been angrily trying to stop development in tight oil formations with ridiculous arguments about fracking. They and the Democrats are OPEC's best friends.
The kingdom and its allies Kuwait, Qatar and the United Arab Emirates will need to produce about 2 million barrels a day less in 2014 to prevent a glut, the Centre for Global Energy Studies predicts. That’s equal to annual revenue of about $80 billion at today’s prices. The 12-nation group meets in Vienna on Dec. 4 and will reaffirm its collective limit of 30 million barrels a day, according to 22 of 24 analysts and traders surveyed by Bloomberg News.
OPEC is already producing above target, even with output disrupted in member states Iraq, Libya and Iran. Demand for the group’s crude will decline by about 900,000 barrels a day in 2014 as the U.S. pumps the most in almost a quarter century, the International Energy Agency says. A glut would lower prices that are averaging more than $100 a barrel for a fourth year, curbing revenue for Persian Gulf nations that on average rely on the sales for about 80 percent of government revenue.
“Next year OPEC’s going to have to act,” said Seth Kleinman, the head of energy strategy at Citigroup Inc. in London. “There’s a lot of crude that’s coming. Iraq is coming in 2014, there’s no sign of the U.S. stopping, and you have to believe you’re going to see more leakage from Iran. It could be anywhere from 1 million to 2 million barrels a day that the market could be looking for Saudi Arabia” to cut, he said.