Wednesday, December 17, 2008

OPEC disarray

Financial Times:
Saudi Arabia called on Tuesday for the biggest single production cut in the history of the Opec oil cartel to counter the collapsing price of oil.
Oil prices jumped on Tuesday after Mr Naimi’s [Ali al-Naimi, Saudi Arabia’s oil minister] comments but fell again to close at $44.04, down 47 cents.
Iran, Venezuela, and Angola have failed to live up to pledges to reduce production substantially. Angola, Opec’s most recent entrant and next president, increased production last month, according to Opec’s forecasters.

David Kirsch, analyst at PFC Energy, the consulting group, said: “Naimi clearly has reservations about seeing Saudi Arabia reprise its classic swing producer role within Opec by shouldering the lion’s share of any production adjustments. Nevertheless, it now appears that the Saudis are willing to do what it takes to strengthen prices, irrespective of other members’ compliance levels.”

The dramatic drop in the oil price, now below the level at which Saudi Arabia can balance its budget, was the prime reason for the kingdom’s decision.
My emphasis.

Update: Writing from a U.S. perspective, TigerHawk observes,
I cannot help but notice that two of OPEC's leading cheaters, Iran and Venezuela (which had the stones to call for deeper production cuts just today, even though it had not implemented the last one), are the most openly anti-American of its members. So, our enemies are doing their level best to steal from and undermine the cartel that is fixing the international price of our most important strategic commodity.

I don't care who you are, that's funny.

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