Regency Associates: Saudi Arabia, Kuwait and other big oil producers in the Organization of Petroleum Exporting Countries (OPEC) have elected to maintain current output as part of their efforts to build market share.

At their recent meeting in Vienna, Austria, the collective voted to keep output high despite the prevailing oversupply in the market that has driven prices for crude oil to a six-year low. The next meeting, scheduled for December 4, is unlikely to bring with it any softening of tone from the group which produces 40% of the world’s oil.

However, according to Regency Associates, the meeting could bring louder dissent from the poorer members of OPEC who, unlike their Gulf counterparts with their low production costs, generally need market prices to be higher in order to meet their domestic budgets.

“Venezuela, Nigeria, Angola and others need prices closer to $100 a barrel to meet their costs but with oil currently trading below $50, they’re calling for their fellow OPEC members to soften policy and scale down production to drive prices higher,” said Matthias Thon, chief commodities analyst at Regency Associates.

Saudi Arabia, one of the richer OPEC members, has been able to withstand lower prices by using its massive foreign currency reserves to plug holes in its costly domestic budget but other OPEC members have begun to experience political unrest as reduced revenues impact on their economies.

“OPEC knows it must deal with the issue of market share now by squeezing high-cost producers in the US and elsewhere because it’s far more difficult to claw back share once it has been lost to competitors,” said Thon.

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