Oil prices fell sharply on Friday after it was reported that OPEC will raise its crude output ceiling by 1.5 million barrels a day. This is believed by many market watchers that it signals a production increase that could heighten global supply of oil that already is approaching oversupply.
U.S. crude fell $1.17 to $39.91 a barrel on the New York Mercantile Exchange in early trading Friday. Brent dropped 87 cents to $42.97 a barrel on the ICE Futures Europe.
Houston’s Fuel Fix reports that “Indonesia, which produced an estimated 789,000 barrels a day last year and has 3.7 billion barrels in reserve, originally joined OPEC in 1962 and left the group in 2009. Its return became official on Friday. Iran expects to put at least 500,000 barrels a day back into international markets next year, when the United States and other western powers are expected to lift oil sanctions against the Islamic Republic.”
Production from other Middle Eastern players such as Iraq and Saudi Arabia has surged this year, keeping global oil supplies ahead of crude demand. And despite the volatility introduced by OPEC policy decisions, the group expects crude demand and supplies to come more into balance next year, “with demand for OPEC crude climbing by 1.2 million barrels a day to an average 30.8 million barrels a day,” reported Fuel Fix.