OIL extended losses in Asian trade yesterday after the Organisation of the Petroleum Exporting Countries (Opec) cartel refused to cut production despite a global glut that has sent prices slumping to four-year lows, with analysts warning of more falls to come.
United States West Texas Intermediate (WTI) for January delivery was at US$68.08 a barrel in afternoon trade, down US$0.97 from its settle price in electronic trading in New York on Thursday. US floor trading was closed due to Thanksgiving.
Brent crude for January fell 1.31 cents to US$71.27.
Opec, which pumps out one-third of the world’s oil, opted to stick by its output target, even after prices have plunged by 35 per cent since June.
The 12-nation cartel “decided to maintain the production level of 30 million barrels a day” where it has stood for three years, it said after a meeting on Thursday at its headquarters in Vienna.
Oil prices were routed after the decision was announced, with WTI tanking to US$67.75, a level last seen since May 2010, while Brent also fell to a four-year low of US$71.25.
At Thursday’s Opec meeting, the cartel came under pressure from its poorer members, including Venezuela and Ecuador, to trim production as tumbling prices were eating into revenues and raising fears over their economies.
But the group’s powerful Gulf members led by kingpin Saudi Arabia resisted the calls to turn down the taps unless they are guaranteed a market share, particularly in the US, where cheap shale gas has contributed to the supply glut.
Kuwait supported the move with the country’s oil minister Ali Omair saying: “We decided that price will adjust itself based on supply and demand and that Opec is supposed to safeguard its market share in order not to lose its clients.”
Venezuelan President Nicolas Maduro said on Thursday he would keep pushing Opec to slash output.
“We have not succeeded yet, but... we will continue to try until prices return to where they should be, at around US$100 a barrel,” he said.
In Asia, energy stocks took a beating. Santos, one of Australia’s largest oil and gas producers, lost 13 per cent and BHP Billiton was down 3.37 per cent in Sydney, while Hong Kong-listed CNOOC was off 5.8 per cent in the afternoon and PetroChina lost 3.6 per cent.
However, airlines, whose main expense is fuel, rallied. In Hong Kong, Air China jumped 6.3 per cent, Tokyo-listed Japan Airlines added 5.28 per cent, Qantas gained 6.98 per cent in Sydney, while Singapore Airlines rose almost two per cent.
CIMB Group Holdings said a further decline in oil prices means Asian governments were unlikely to raise interest rates soon.
Meanwhile, Russia’s most powerful oil official Igor Sechin said in an interview with an Austrian newspaper oil prices could fall below US$60 by mid-way through next year.
Sechin, chief executive of Rosneft, Russia’s largest oil producer, also said US oil production would fall after 2025 and that an oil market council should be created to monitor prices. Agencies