Oil price falls to 6-year low as OPEC abandons production target

An oil pump works at sunset Monday, Dec.7, 2015, in the desert oil fields of Sakhir, Bahrain.
An oil pump works at sunset Monday, Dec.7, 2015, in the desert oil fields of Sakhir, Bahrain. AP

Oil fell to the lowest level in more than six years amid speculation that a record global glut will be prolonged after OPEC effectively abandoned its longtime strategy of limiting output to control prices.

The Organization of Petroleum Exporting Countries will keep pumping about 31.5 million barrels a day, President Emmanuel Ibe Kachikwu said Friday after a meeting in Vienna. OPEC is setting aside its output quota of 30 million barrels a day, a target it has breached the past 18 months, until members gather again in June. Gasoline and diesel also closed at the lowest levels since the financial crisis of 2008 that sent the country into a recession.

Oil has slumped more than 40 percent since Saudi Arabia led OPEC’s decision in November 2014 to maintain output and defend market share against higher-cost U.S. shale producers. Global stockpiles have expanded to almost 3 billion barrels as the Saudis, Russia and Iraq increased supply, according to the International Energy Agency.

“We’re plunging with the dawn of an OPEC without quotas,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund. “The Saudis doubled down on their strategy of driving out higher-cost producers. They are prepared to play a long game to return to dominance.”

West Texas Intermediate for January delivery sank $2.32, or 5.8 percent, to settle at $37.65 a barrel on the New York Mercantile Exchange, the lowest close since February 2009.

“The OPEC meeting reinforces that the market needs to rebalance itself and it ain’t going to happen quickly,” Mike Wittner, head of oil-market research in New York at Societe Generale SA.

Inventories have climbed as production has outpaced demand. U.S. crude supplies rose to 489.4 million in the week ended Nov. 27, the highest level for this time of year since 1930, Energy Information Administration data showed Dec. 2.