Posted on 12/10/2014 2:39:09 PM PST by thackney
Saudi Oil Minister Ali al-Naimi on Wednesday shrugged off suggestions that the world's biggest crude exporter might cut production to reverse the deepest price slump in years, saying the kingdom's output had remained steady through last month.
Naimi's comments on the sidelines of an annual U.N. climate change conference in Lima, Peru, stuck to the message he laid out at OPEC's meeting two weeks ago: The market would be left to balance itself without the kingdom's intervention. That stance was seen as a shift from longstanding Saudi policy to act as a swing supplier.
Oil prices have dropped $13 a barrel since that November meeting. Yet asked on Wednesday whether he thought it would be necessary to reduce oil production prior to OPEC's next scheduled meeting in June, Naimi responded: "Why should we cut production? Why?"
At the same event, Venezuela's foreign minister and top OPEC emissary Rafael Ramirez provided his country's answer to Naimi's question: OPEC must act, he told Reuters, because "that is our job. We want stability in the market and predictability."
Ramirez said Venezuela would evaluate whether to back a call for an emergency OPEC meeting after seeing how oil prices perform in the first quarter.
He said it would be up to Nigeria, the current head of the cartel, to summon members to an extraordinary gathering to respond to the price collapse.
"It's worrisome not just for Venezuela, but for all countries in OPEC," he said.
Last month, Gulf producers overruled Venezuela's push for an OPEC production cut.
The comments highlight growing division within the Organization of the Petroleum Exporting Countries. Core Gulf producers have the cash reserves to ride out a spell of lower prices, while more vulnerable economies like Venezuela's are already strained by sub-$100 crude.
Naimi said the Kingdom produced 9.6 million...
(Excerpt) Read more at rigzone.com ...
This past year many grain farmers only sold as needed to get by.
The remainder is in storage; awaiting a better price.
We as individuals can’t print money like our government does but we do spend we don’t have through the undisciplined use of our credit cards. Eventually real earnings have to pay for all the things we buy. Same thing with countries because eventually money printing leads to hyperinflation.
As someone wisely said, you can avoid reality but you cannot avoid the consequences of reality.
A couple of months ago the Saudis suggested they were OK with oil prices around $80, for a year or two. Current price is about 25% below that number so if you apply that percentage to their projected timeframe, you get 9 months to 1.5 years. So its reasonable to assume it would be even less given a further price drop down to $50.
That said they clearly see ISIS as an existential threat so maybe they’re willing to extend this game a little more. The Saudis are well heeled, and they’d like to stay that way. So its not an open ended game for them.
Farmers can and do quit when farming becomes uneconomical.
I think SA is making a virtue out of necessity. I think it would take a cut of 3 MBD to bring the market back, and it wouldn't be immediate.
Practically speaking they can't do that. They have a longer time horizon than the next 12 months.
I also suspect geopolitical factors are at play.
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