On Friday 4 December the 168th meeting of oil producers’ cartel OPEC is set to take place in Vienna and it may be one of the more contentious in the organisation’s long history.

Prices have more than halved in the 12 months since OPEC surprised the markets at its December 2014 meeting. Few predicted the Saudi Arabia led strategy to keep pumping the black stuff despite price weakness in attempt to put the squeeze on rival producers in the US and retain market share.

This latest decision on quotas is likely to have at least some impact on oil prices and this should feed through to the UK oil and gas sector. Most observers expect little change for now.

RBC Capital Markets comments: ‘Heading into the December OPEC meeting, the interests of member countries have perhaps never before been so far apart. While disagreements were evident at the June meeting, discontent with the pseudo-consensus appears more dire, with the low price environment further stressing the already highly stressed members of the cartel.

‘Our 'fragile-five' (Libya, Iraq, Venezuela, Nigeria and Algeria) remain at high risk, with Libya and Iraq on the front lines of the war against IS. Additionally, we raised the risk profile for Algeria on the back of both looming political uncertainty and continued security challenges.

‘While our base case remains that Saudi digs in and maintains the market share strategy, we believe that the situation remains very fluid and that internal OPEC dynamics could ignite a surprise search for an exit ramp.’

UBS adds: ‘We expect no fundamental change in strategy however as market rebalancing plays out through the non-OPEC world: cuts in investment drive a 0.5Mb/d contraction in non-OPEC supply next year.’

Panmure Gordon says: ‘In  the  absence  of  a  concrete  decision  to  curtail output  next  Friday,  OPEC  may  be  contemplating  a  more proactive  role  including calling the next meeting  for Spring, raising the current  30mmbbl  group  target, and allocating the target to individual members.’

Issue Date: 30 Nov 2015