The Organization of Petroleum Exporting Countries (OPEC) – led by Saudi Arabia – decided on Thursday not to cut oil production, despite sliding oil prices.
Following a meeting of OPEC in Vienna, Saudi Arabia’s oil minister Al-Naimi was asked whether the group had decided not to reduce its output from 30 million barrels per day. He responded: “That is right”.
Read More: Saudis to push OPEC to cut output: CNBC survey
Al Naimi’s remarks were backed up the Kuwaiti oil minister. The two ministers were speaking after a highly-anticipated, five-hour OPEC meeting.
“The OPEC decision was certainly disappointing but not surprising,” Naeem Aslam, chief market analyst at Avatrade wrote in a note shortly after the news broke. “The fact is that even if they had a cut in the production today, there are still questions in the long term over the stability of the price.”
Read More: Gulf OPEC producers agree not to cut output: Rpt
Brent crude oil fell more than USD 3 to under USD 75 a barrel – a fresh four-year low – on news. Global oil prices have plunged since peaking in June, and Brent crude has lost around a third of its price from USD 115 a barrel.
Weak demand, a strong dollar and booming US oil production are the three main reasons behind the fall, according to the International Energy Agency (IEA), which warned of a “new chapter” for oil markets, which could even affect the social stability of some countries.
The drop in oil has weighed heavily on energy stocks but has boosted some companies that are heavily reliant on the commodity, like airlines.
Read More: OPEC needs to ‘wake up’ to shale revolution
Neil Atkinson, the head of analysis at Lloyd’s List Intelligence, told CNBC that oil will slide further in the coming weeks but without any “massive downside.”
He added that Saudi Arabia was right to be patient in making a decision and will use the next three months to put further pressure on non-OPEC producers – like Russia – to come to an agreement on production.
One of the main pressure points on the price of oil — and on OPEC to cut its production — has been the success of the U.S. oil shale industry.
Robbie Diamond, President and CEO of Securing America’s Future Energy (SAFE), a lobby group that works to improve U.S. energy security, commented on the OPEC decision in a statement.
“Whatever OPEC’s decision on oil production levels, its attempt to control this commodity—the lifeblood of the global economy — exemplifies the importance of reducing oil’s monopoly over U.S. transportation by pursuing policies and technologies that can free us from this cartel’s influence,” he said.