Posted on 08/20/2015 4:22:13 PM PDT by bananaman22
OPEC next gathers December 4 in Vienna, just over a year since Saudi Oil Minister Ali Al-Naimi announced at the previous OPEC winter meeting the Saudi decision to let the oil market determine oil prices rather than to continue Saudi Arabia’s role of guarantor of $100+/bbl oil.
Despite the intense financial and economic pain this decision has inflicted on Saudi Arabia, its fellow OPEC members, and other oil producers, the Saudis have given no indication they plan to alter course. In fact, Saudis have downplayed the impact of lower prices on their country, asserting that the kingdom has the financial wherewithal to withstand lower oil prices.
Presumably swayed by Saudi equanimity, financial markets do not see the Saudis abandoning their current policy before, during, or after the upcoming OPEC meeting. CME Brent oil futures project continuity: as of August 18, 2015, CME Brent futures projected the price remaining below $60/bbl until June 2017. A CNBC poll of oil traders, analysts, and major fund investors, aired on CNBC August 17, showed 95 percent believing the Saudis will not alter course.
Are the futures market, CNBC’s oil traders, analysts, and major fund investors, and others, being lulled into an unjustified consensus?
The damage the Saudi decision has inflicted on Saudi Arabia itself provides reasons for the Saudis to change course.
(Excerpt) Read more at oilprice.com ...
Will this matter? All the counties that have a problem would still cheat if OPEC made cuts. So basically, they just want Saudi Arabia to cut production. Why should they?
“Xactly. They can form Sub-OPEC and just shut themselves down.
Are they going to force Arabia to cut production? That doesn’t seem likely.
The Saudis are burning through hundreds of billions of petro dollars to try to punish Anerican producers. That’s money (and oil) they’ll never get back. They’re playing a game of chicken hoping to put a serious dent in the U.S. shale revolution and less American dependence on the muslim world.
It could be that low oil prices will eventually lead to someones (Iran or Saudis} oil fields being taken out.
There is nothing OPEC can do anymore because they are no longer the main driver of the price of oil. If they cut their own production others outside OPEC can raise production. They will get less revenue from any cut and that’s it. The only thing they can do is politically impossible. They need to cut the welfare givaways coming from their state owned oil companies.
My guess too. It won’t be likely.
Saudi aren’t financially hard-pressed. They actually started to factor in they couldn’t rely on oil prices as a main source of revenue, several years ago, looking for alternatives.
BTW, a main contributor to the fall of USSR was SA; they at the time increased production as to saturate the market which led to a significant drop in crude prices.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.