With oil prices currently sitting at their lowest levels in almost seven years, OPEC could be forced into emergency action in the coming weeks to help stabilise the market.
Indeed, OPEC, or the Organisation for Petroleum Exporting Countries, sparked the initial rout late last year when they refused to lower their daily production limit. OPEC is the world's biggest oil cartel and, despite an already oversupplied market, it acted to push prices lower to regain market share from the United States and other non-OPEC nations.
Falling from roughly US$115 a barrel back then to less than US$40 a barrel today, OPEC was again the centre of controversy recently when it once again ignored the market's pleas for action. A number of its own member countries, including Venezuela, are struggling immensely in this low price environment and conditions will only worsen should oil prices fall lower.
According to The Sydney Morning Herald today, the latest fall may be enough to force OPEC's hand. Quoting the UK Telegraph's Ambrose Evans-Pritchard, the SMH said that the cartel could be forced to call an emergency meeting "within weeks" if Saudi Arabia's strategy for flooding the market creates a more severe crisis.
Evans-Pritchard also said that (emphasis my own): "Everything points to low oil prices next year, and it's possible that it could be $US30 a barrel, and maybe less."
The news comes at a time where Australia's energy and gas shares are hovering at levels not seen in years, and in some cases, more than a decade. BHP Billiton Limited (ASX: BHP) shares, for instance, have fallen another 1.4% today and hit a new 10-year low of $16.25 earlier, while Liquefied Natural Gas Ltd (ASX: LNG) shares have fallen 8.5% to 81 cents.
Origin Energy Ltd (ASX: ORG) shares are also down 2.5%, while the share prices of various others in the sector have risen after oil prices stabilised overnight.
Regardless of whether or not OPEC does hold an emergency meeting, it seems likely that oil prices will remain low for some time yet, making the energy sector a dangerous space to be exposed to now.
