Despite continued price weakness and a global supply glut, the Organization of the Petroleum Exporting Countries (OPEC) refused to cut its production target at the group’s latest meeting.
OPEC said on Friday that while OECD and non-OECD inventories are currently well above the five-year average it will not curb production levels that have averaged over 31 million barrels per day over the last six months.
In what sources told Reuters was a response to Iran’s pending re-entry to the global market, OPEC members agreed to drop references to the group’s output ceiling.
Several OPEC sources told the news wire that the group’s members decided that dropping reference to the output ceiling, rather than raising its production target, would have less of a negative impact on crude prices.
OPEC has no formal means to enforce its production targets.
The group expects non-OPEC supply to contract in 2016 while global demand is anticipated to expand again by 1.3 million barrels per day.
OPEC said that in light of its projections and “emphasizing its commitment to ensuring a long-term stable and balanced oil market for both producers and consumers, the conference agreed that member countries should continue to closely monitor developments in the coming months.”
Western sanctions against Iran have restricted crude exports to 1 million barrels a day from a high of 2.5 million barrels per day since 2012.
Although the oil-rich country reached a sanction ending deal with six global powers earlier this year, it is unclear how quickly Iran will be able to ramp exports back up to pre-sanction levels.
According to the International Energy Agency, global oil supplies climbed past 97 million barrels per day in in October, as non-OPEC output recovered from lower levels in September.
Although demand growth rose to a five-year high of nearly 2 million barrels per day, strong OPEC production and resilient non-OPEC supply have pushed global crude stockpiles up to a record 3 billion barrels last month.
The IEA expects demand growth to ease closer to a long-term trend of 1.2 m million bpd in 2016 as “supportive factors that have recently fuelled consumption are expected to fade.”
Oil production from OPEC totaled 31.08 million barrels per day in October, down 120,000 bpd from September, according to Platts.
WTI crude prices plunged to $38.16 per barrel around noon on Monday while Brent crude fell to $41.36 per barrel.
OPEC also approved the resumption of Indonesia’s full membership in the organization after the country took a six year hiatus from the group.
OPEC added that current Secretary General HE Abdalla Salem El-Badri will continue to serve as acting secretary general until a new secretary general is elected at the end of July 2016.