OPEC Cuts Projection to Lowest Demand in 12 Years

Saudi Arabian oil minister Ali Al-Naimi annouced late November that OPEC's production ceiling would be unchanged. 

The Organization of Petroleum Exporting Countries (OPEC) has lowered its 2015 crude demand projections, dipping to its lowest in 12 years, reports Bloomberg. 

Demand was cut by about 300,000 barrels to roughly 28.9 million barrels per day, while OPEC's three largest producers, Saudi Arabia, Kuwait, and Iraq, are reportedly offering its steepest discounts to Asian countries in at least six years. 

The extreme price drops have prompted critics such as Bank of America commodities chief Francisco Blanch to comment that OPEC has effectively "dissolved as a cartel," as the amount of supply coming from non-OPEC nations has diluted Saudi Arabia's ability to be the arbiter of the price of oil.

In the meantime, China is reportedly one of the countries benefiting the most from the abundant American and Russian supply, with the plummeting cost of crude pushing Russia to depend more heavily on exports to the Chinese. 

Oil prices began collapsing back in September, and took another nosedive late November after Saudi Arabian oil minister Ali Al-Naimi announced that OPEC would be maintaining its existing production ceiling despite the amount of crude flooding the market. 

The action was widely described as a targeted move against the booming American shale gas industry, which has provided much of the oversupply. 

"Naimi can't change policy within two weeks of an OPEC meeting; they've got to stick it out for at least a quarter to make it obvious that non-OPEC can't rely on high and stable prices," said Paul Horsnell, head of commodities research at Standard Chartered Plc.

"If it's clear there's damage done on non-OPEC, that's the time they can start calling the dogs off."

According to Iranian Oil Ministry official Mohammad Sadegh Memarian, OPEC members will have to maintain its decision, lest they trigger a "price-dive shock" that could send prices tumbling to as low as $40 or $50 per barrel. 

Saudi Arabia had previously said that it expected oil prices to stabilize at around $60 per barrel.