Why OPEC will hold out even if oil falls to $40

Jessica Morris
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Oil will have to slip a lot lower before OPEC cuts production (Source: Getty)

OPEC will not cut production even if oil falls to $40 per barrel as it believes the market will eventually stabilise.

The energy minister for the United Arab Emirates told Bloomberg News that the group would wait "at least a quarter" before it considered an urgent session.

Suhail Al-Mazrouei said "we are not going to change our minds because prices went to $60 or to $40."

A global oversupply of oil and economic uncertainty has shaved 40 per cent off the price of crude oil since June this year, piling pressure on the world's biggest oil exporters.

At its November meeting Opec defied expectations by sticking with current levels, as Saudi Arabia argued this was needed to retain market share and fight off the threat from US shale gas production.

For countries such as Venezuela, which requires $121 a barrel to break even, the decline is much more concerning.

Analysts at DNB Markets have lowered their forecast for prices to "slightly below" $60 in early 2015, however earlier this week Iranian oil minister Bijan Namdar Zangeneh suggested prices could fall as low as $40.

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