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Oil Prices at 2009 Levels: Global Production Remains High Despite Dip

Image: Oil Prices at 2009 Levels: Global Production Remains High Despite Dip
The Suncor refinery in Edmonton, Canada, seen here on June 17, 2015 has, according to the company, a capacity of refining 142,000 barrels of light oil a day. (Geoff Robins/AFP/Getty Images)

By    |   Tuesday, 08 Dec 2015 11:20 AM

Oil prices tumbled to 2009 levels Monday after OPEC essentially abandoned its strategy of "limiting output to control prices," Bloomberg Business reported.

According to the publication, the West Texas Intermediate for January delivery fell 5.8 percent, or $2.32, to $37.65 a barrel on the New York Mercantile Exchange. That marks oil's lowest level since February 2009.

On Friday, Ibe Kachikwu, the president of the Organization of Petroleum Exporting Countries, said the group will keep pumping out about 31.5 million barrels a day, according to Bloomberg. The total surpasses OPEC's previous quota of 30 million barrels a day.

"Unfortunately, the meeting just restates that OPEC is stuck to their strategy of protecting market share," Luana Siegfried, energy analyst at Raymond James, told MarketWatch. "[The decision] most likely will keep a lid on crude prices as the supply side of the supply/demand curve . . . will remain glutted, not being totally absorbed by weak demand."

OPEC's decision seemed to establish that the market will continue to struggle with an over-supply of oil.

"No result is also a result, and in the case of OPEC it is hard to imagine a more negative one," Commerzbank commodity analysts stated in a Monday note, according to MarketWatch. "If in a critical situation OPEC cannot even agree on a lowest common denominator such as an official production limit, it is permissible to question its right to exist. In any case, the oil price looks likely to find virtually no support from OPEC in the coming months."

CBC News' Pete Evans said it appears that OPEC's decision was made to harm shale producers in the United States.

"OPEC has more or less successfully managed the oil market for decades by capping the amount that it allows to enter the market," Evans wrote. "It's believed that the cartel was willing to see oil prices crater in an attempt to drive U.S. shale producers out of business, because the latter have much higher production costs and can't stay profitable for long in a cheap oil environment."

"But the U.S. shale industry has proved far more resilient than first thought, as American oil companies so far haven't balked or moved to cut their own production significantly," he continued.

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Oil prices tumbled to 2009 levels Monday after OPEC essentially abandoned its strategy of "limiting output to control prices," Bloomberg Business reported.
oil, price, 2009, levels, fell
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2015-20-08
Tuesday, 08 Dec 2015 11:20 AM
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