Oil markets are entering a new era of low prices that OPEC is virtually powerless to halt amid a surge in North American supplies of crude and deep divisions within the cartel over strategy, the world’s leading industry expert has said.
“We are now entering a new era in world oil and we will have lower prices for some time to come,” said Daniel Yergin, the Pulitzer Prize-winning author of The Quest: Energy Security and the Remaking of the Modern World.
Ministers representing the 12 members of the Organisation of Petroleum Exporting Countries (OPEC) are due to meet on November 27 in Vienna to discuss a possible cut in the group’s quota to reverse a sharp decline in oil prices since June.
But Mr Yergin, who also sits on the US Secretary of Energy Advisory Board, said there was little that the cartel could do to counter the surge in North American supplies of crude.
“North American supply is a challenge to OPEC today just like the North Sea was in the 1980s. OPEC is going to have a very hard time adjusting to this because there isn’t agreement within the group on what to do,” Mr Yergin said.
“Everyone is happy for Saudi Arabia to cut production but the Saudis don’t want to cut and lose more market share, especially to Iran and Iraq.”
OPEC’s decision on whether to cut backits quota of 30 million barrels per day of production will also be complicated by deep divisions over strategy.
Venezuela and some smaller producers appear to be pushing hard for OPEC to make deep cuts but Saudi Arabia – the group’s largest producer – is yet to reveal its intentions.
“The only thing that really unites OPEC members now is that they all produce oil but if the price keeps going down, then the pressure will build for some kind of action,” Mr Yergin said.