VIENNA — OPEC decided not to cut oil production to boost falling prices, sending benchmark crude plunging to a four-year low.
Brent crude, the international benchmark, fell more than $6, to $71.25 a barrel, after OPEC ministers meeting in Vienna left the group’s output ceiling unchanged despite huge global oversupply. The decision reflected OPEC’s lessening oil clout and marked a major shift away from its long-standing policy of defending prices.
The Organization of the Petroleum Exporting Countries, which accounts for a third of global oil output, has traditionally relied on production cuts to regulate supply and prices. But oil ministers appeared to realize Thursday that with cheap crude in oversupply, a reduction would only cut into OPEC’s share of the market without a lasting boost in prices and with others outside the cartel making up the difference.
Instead, the move to maintain a production target of 30 million barrels a day appeared to reflect acceptance of Saudi Arabia’s view within OPEC that short-term pain had to be accepted for later gain.
The Saudis and their Persian Gulf allies hope to put economic pressure on rival producers in the United States, which need higher prices to break even. In the long term, that could help reaffirm OPEC’s dominance of the oil market.
It would also be good news for consumers and oil-importing nations that have watched oil prices fall from about $115 a barrel as recently as June.
Oil ministers had come to Thursday’s meeting facing two unpalatable choices: Cut their production from 30 million barrels a day in an effort to boost prices and see OPEC’s market share fall, or do nothing in hopes of riding out the crisis.
Paring output may not have been very effective because supply from non-OPEC countries, such as the United States, remains high. Also, discipline within the 12-member organization is lax, and overproduction by some members would have diluted the effectiveness of any production cut.
In any case, OPEC could have not afforded to scale back production by more than 1 million barrels a day — too little to make a sizable dent in supply.
OPEC Secretary General Abdalla Salem el-Badri suggested that all members were on board with the decision to maintain the present output level. “The ministers are happy,” he told reporters.
“I see no nagging from consumers, no nagging from producers,” he said.
In fact, the decision once again appeared to reflect Saudi Arabia’s clout over less powerful OPEC rivals.
By opposing an output cut, Saudi Arabia appears to be hoping to drive prices below the level at which shale oil production is economical. Experts say shale oil production turns too costly at the $60-per-barrel level.
“When it comes to the raw decision-making, that is left to the unofficial leader, Saudi Arabia,” said Alfa Energy chairman John Hall.
The Saudis, who account for about a third of OPEC output, can weather lower prices because their coffers are well-padded and production costs are relatively low.
But poorer OPEC members, such as Venezuela and Nigeria, need levels close to $100 or above to fund national budgets. Saudi rival Iran is suffering, too, with the oil-price drop adding to huge revenue losses as a result of sanctions on crude sales that were imposed because of its nuclear program.
If sanctions were to be lifted as part of a nuclear agreement next year, Iran still would need prices close to $140 a barrel to finance the government budget. Crude export revenues finance more than 50 percent of the government’s outlays.
In the case of Venezuela, the International Monetary Fund says it needs to sell oil at about $120 a barrel to avoid the threat of national bankruptcy.
Nigeria also needs a stronger market to flourish. Analysts say the government has organized its 2015 budget around an oil price of $78 a barrel based on production of 2.4 million barrels a day — but the country is pumping only about 2 million barrels a day.
Angola, Ecuador and other OPEC members with limited production may also suffer, but not so Saudi Arabia’s wealthy allies Qatar, the United Arab Emirates and Kuwait.
Iranian oil minister Bijan Namdar Zangeneh said the “OPEC decision was not entirely what we wanted,” and analysts suggested that others share that view.
“I think you’re going to see additional tension between the OPEC ranks,” said Jamie Webster, senior director of crude oil markets at IHS consultants.