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OPEC Holds Production Unchanged; Prices Fall

“We don’t want to panic,” said OPEC’s secretary general, Abdalla El-Badri, center, with journalists at the Vienna meeting.Credit...Samuel Kubani/Agence France-Presse — Getty Images

VIENNA — The oil cartel OPEC decided on Thursday not to cut petroleum production, despite the plunge in prices in recent months that has indicated the diminishing clout of the organization.

On news of the decision by the Organization of the Petroleum Exporting Countries, the price of Brent crude oil, a global benchmark, fell an additional $4 to a four-year low of about $73. American crude dropped below $70, an even more significant threshold.

A more than 30 percent decline in prices in recent months has shaken the 12-member group. For three years, OPEC had little trouble keeping prices in the $100-a-barrel range that many of its members consider satisfactory.

But markets have spun out of OPEC’s control of late. Prices have come under pressure as global output of crude oil outstripped demand this year. Analysts forecast excess supplies of crude to continue to build in 2015.

The main new source of supply is oil extracted from shale in the United States, which is expected to add about one million barrels a day of oil production this year and an additional one million barrels a day in 2015.

OPEC seems at a loss about how to cope with this new source of competition and is also struggling to influence other big producers outside the organization like Russia and Brazil. Unable to come up with a strategy for handling these new developments, the cartel has decided not to intervene, evidently hoping that low prices will eventually curb production in the United States.

The price decline “does not mean we should really rush and do something," OPEC’s secretary general, Abdalla El-Badri, told reporters after the meeting here on Thursday. “We don’t want to panic,” he said. “We want to see how the market behaves.”

Even though lower prices will hurt oil producers in the United States, the American economy will probably benefit as consumers have more money to spend and companies’ energy bills decline. Europe and Japan, both large oil importers, are also likely to get a boost from lower prices, although in Europe high taxes on energy limit gains for consumers.

Lower prices, on the other hand, could be very painful for OPEC producers, who depend heavily on oil revenue.

Some of the world’s largest exporters of oil, including Iran, Iraq, Saudi Arabia, the United Arab Emirates and Venezuela, are members of OPEC. The group meets at least a couple of times a year, usually in Vienna, where the organization has its headquarters, but sometimes more often to discuss and try to manage the global oil markets.

While Saudi Arabia, Kuwait and the United Arab Emirates have each stashed away hundreds of billions of dollars in savings to buffer the effects of lower prices, Iran, Algeria and Venezuela, for example, will struggle to finance their government budgets at current price levels, according to a recent study by Rachel Ziemba, an analyst at Roubini Global Economics.

Venezuela and some other producers badly wanted a cut to prop up prices and will be bitterly disappointed by the meeting’s outcome.

Analysts say that Thursday’s announcement signals a radical change on the part of OPEC. Bhushan Bahree, an OPEC analyst at the market research IHS firm, called the announcement “a major tactical shift.” For decades OPEC has intervened to manage oil prices, cutting production when necessary. “Now they are defending volume and letting the rest take care of itself,” he said.

Analysts say that at least some OPEC powers appear to have recognized that lower prices may prevail for a considerable time. In that situation, the organization needs to work on regaining market share.

While exports of crude oil from the United States are still restricted, the surge in output is being felt on global markets as a result of the increased export of refined petroleum products like gasoline.

American imports from OPEC and elsewhere have also been sharply reduced, forcing OPEC producers to compete for the remaining markets in Asia and Europe. Iran, for instance, is storing as much as 100,000 barrels a day on tankers because it is unable to find markets.

Analysts say the surge in supply from the United States poses particular challenges to OPEC because there is little the producers’ group can do but hope that lower prices will eventually discourage investment in drilling in the United States, thus reducing production.

The dynamic has shades of the early 1980s, when new crude supplies emerged from the North Sea, Alaska and Mexico, sending prices falling and squeezing OPEC’s market share.

“OPEC faces its greatest threat since the early 1980s,” said Mr. Bahree, the analyst.

This divide between the countries that can endure low prices and those whose economic needs are more pressing is probably affecting OPEC’s efforts to come up with a response to the declining price.

Despite an effort to maintain a calm front, there were signs of frustration. During the traditional session with reporters at the beginning of Thursday’s meeting the Saudi oil minister, Ali Al-Naimi, angrily shooed away reporters and refused to answer questions.

Mr. Naimi had apparently grown weary of being surrounded by reporters as he tried to make his way through the lobby of Vienna’s Grand Hotel, which serves as a kind of informal headquarters for OPEC meetings because the Saudis and other OPEC delegates always stay there.

Mr. Naimi, an important figure in OPEC because of Saudi Arabia’s dominant role and his own long tenure, has been in Vienna since Monday, meeting with other producers from both inside and outside the organization in an effort to devise a unified response.

Igor Sechin, the chief of Russia’s state-controlled Rosneft, met with Mr. Naimi to discuss cutting production, but no agreement was reached. OPEC officials had high hopes that Russia might join the organization in cutting production.

OPEC may be facing a prolonged period of weak markets for its crude. IHS forecasts that the growth of supply outside of OPEC next year will exceed global demand growth, leaving no room for OPEC countries to increase their production.

At least for the time being, OPEC appears to have decided it will be too difficult to negotiate the production cuts with individual members that analysts say are necessary to have a strong impact on the market. OPEC has not had individual production quotas since 2011, when it agreed to operate on the basis of group output targets rather than individual limits. Restoring quotas is likely to be a lengthy and difficult exercise because the quotas are matters of prestige and economic power.

Several OPEC countries have the potential to increase their production. Iraq has ambitions to greatly increase above its present three million barrels a day, and its officials insist that they have the right to make up for decades of lost output and should not be bound by OPEC limits. Iran, too, could eventually greatly lift output if international sanctions are lifted.

OPEC may be retaining the informal system of recent years, in which Saudi Arabia, and to a lesser extent, Kuwait and the United Arab Emirates, have adjusted production according to market conditions. These countries have benefited from the political turmoil, sanctions and other problems that have curtailed production in countries like Iran, Venezuela and Libya.

Floyd Norris, whose High & Low Finance column normally appears on this page, is on vacation.

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: OPEC Holds Production Unchanged; Prices Fall. Order Reprints | Today’s Paper | Subscribe

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