The Organization of the Petroleum Exporting Countries (OPEC), in the past, has restrained its output to reinforce the declining oil price. Currently, the price plummet is not stopping them, rather it pushes them to keep pumping, and the reason is to protect the market share instead of the price.
On Tuesday, OPEC reported an output surge to a three-year high in July. It has produced 31.5 million barrels a day, which is more than 1.5 million barrels over the ceiling it has agreed a month earlier, CNN reported.
The organization's report stated that the added oil came from Iran, Iraq and Saudi Arabia. Iran's output, the highest since 2012, boosted the production by 32,300 barrels a day in July to 2.86 million a day.
Benchmark Brent is trading below $50 a barrel, according to Yahoo News Canada. That's considerably low compared to the barrel trading of $115 last summer.
OPEC refused to cut output seeking to recover market share — intending to slow the higher cost production in the U.S. and other countries — that has been encouraged by its prior policy — keep the prices near $100. After the report was released, Brent crude was down to $1.34 at $49.07.
The increase in oil output resulted in market oversupply and falling prices. It caused some tension within the organization, even causing its two vulnerable members, Libya and Algeria, who said they would back an emergency meeting with the group requesting a reversal of the organization's decision to maintain output production.
The calls were rejected by Persian Gulf countries, Saudi Arabia, Kuwait and the United Arab Emirates, The Wall Street Journal has learned.
"There is no need for a meeting," a Kuwaiti oil official said. "The prices are at the same level as in January when OPEC didn't see any reason to gather."
The United States production, on the other hand, has proven its resilience. OPEC reported Tuesday that the U.S. output fell by 260,00 barrels a day in May, but they still see it rising to nearly a million barrels per day within this year and another 320,00 barrels a day in 2016.
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