Could falling oil prices jolt OPEC to action?
August 10, 2016, 10:35 pm

Oil inventories are up, demand is sluggish, and OPEC can’t agree on a cap – what could go wrong? [Xinhua]

Oil prices briefly dipped below the $40 mark last week and in the past few days of trading failed to rebound sufficiently to allay producers’ fears that an oil glut is here to stay.

On Wednesday, US benchmark West Texas Intermediate fell 2.48 per cent to $41.71 while international benchmark Brent Crude fell 2.49 per cent to $43.86 a barrel.

Oil prices had hovered about the $50 mark in June and early July initially signalling what oil and energy ministers in Saudi Arabia, the United Arab Emirates and the US said was a coming period of “balance” in supply and demand.

Not so.

Persistent overstock is leading to fears that oil companies may have to reduce prices further to get rid of excess inventory – a prospect anticipated by some such as Goldman Sachs as early as last October.

Persistent: For three weeks beginning mid-July, the US Energy Information Administration has reported a growth in inventories, much to the surprise of analysts.

For the week ending August 5, US crude inventories grew by 1.1 million barrels.

This is a nightmare (deja vu) scenario for oil producing countries that heavily depend on the black gold as their largest export commodity.

Venezuela, which has suffered an economic crisis as a result of falling oil prices since 2014, has repeatedly called for fellow OPEC members to introduce a production cap or cut back on oil supply in the markets.

Talk of another oil summit, this time in Algeria, helped rebound oil prices on Tuesday but these quickly plummeted once it emerged that there was infighting between OPEC members, with some saying holding such meetings was futile given Iran’s additional production numbers, in addition to the Saudis pumping oil at record levels.

And we saw how the last two attempts at reaching consensus among OPEC and other global producers panned out.

The BRICS Post with inputs from Agencies