By George Jahn – The Associated Press – November 28, 2014
VIENNA — Reflecting its lessening oil clout, OPEC decided Thursday to keep its output target on hold and sit out falling crude prices that likely will spiral even lower as a result.
Oil prices fell sharply on the news. Even though the decision was expected, it showed the once-powerful cartel is losing the power to push up markets to its advantage.
The move to maintain a production target of 30 million barrels a day appeared to reflect acceptance of the Saudi view within OPEC that short-term pain had to be accepted for later gain.
The Saudis and their Gulf allies hope to put economic pressure on rival producers in the U.S., which need higher prices to break even. In the long term, that could help reaffirm OPEC’s dominance of the oil market.
It would be good news for consumers and oil-importing nations.
The global price plunged $5 to a four-year low of $72.76 a barrel. As recently as June it was around $115.
OPEC Secretary General Abdalla Al-Badri suggested all members were on board with the decision to stick to the present output level, telling reporters “the ministers are happy.”
“I see no nagging from consumers, no nagging from producers,” he told reporters.
In fact, the decision once again appeared to reflect Saudi Arabia’s clout over less powerful OPEC rivals.
By opposing an output cut, Saudi Arabia appears to be hoping to drive prices below the level at which shale oil production is economical. Experts say shale oil production turns too costly at the $60 a barrel level.
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