Oil Prices Plunge After OPEC Leaves Output Stable

Nov 2012
10,825
9,017
nirvana
#1
https://www.google.com/url?sa=t&rct...MjCyocSymuYL52Lgg&sig2=W118lzSP2jnj8oNpFRpnxg



The Organization of Petroleum Exporting Countries (OPEC) has decided not to reduce oil production, despite a huge oversupply in world markets. The decision caused global oil prices to drop further.

Following a meeting in Vienna on Thursday, OPEC announced it would leave its combined oil production unchanged at 30 million barrels per day.
The 12-nation oil cartel, comprising some of the world's biggest oil producers, overrode calls from weaker members to cut output in the face of global oversupply and falling prices.
After five hours of talks, Saudi Oil Minister Ali al-Naimi described the outcome of the meeting as a "great decision."
Gulf oil producers led by Saudi Arabia apparently won their case for keeping output stable in hopes of rendering production from non-OPEC members unprofitable, thus driving up prices in the long-run.

Oil prices fall further

Although an OPEC member, Venezuela is one of the countries suffering severely from the current low crude prices. It needs an oil price well above $100 (80 euros) per barrel to finance its national budget.

Venezuelan Foreign Minister Rafael Ramirez left the meeting visibly angry and declined to comment on the outcome.

However, oil prices have fallen by more than a third since June, as increasing production from North America in shale oil has overwhelmed demand at a time of sluggish global economic growth.

Shortly after the OPEC meeting ended, the price for Brent crude oil fell more than $3 to a fresh four-year low of $74.36 a barrel. US crude was at $71.07, down by about $2.

OPEC delegates agreed to meet again in June next year.

uhe/el (Reuters, dpa)
 
Mar 2007
17,143
257
San Diego, CA
#2
Hey, if it helps me at the pump, wonderful. That makes Christmas shopping a little more affordable. And instead of having goose on the table, I can have turkey instead.
 
Apr 2013
38,050
26,062
La La Land North
#4
I think this is a medium term strategy by OPEC to cause higher and more stable prices. Although there is lots of variability in this, there does appear to be a weak but still a concensus that China and India will stabilize and return to growth, hopefully at a more manageable rate. There are signs that the worst is over for Japan. The US is doing better and better and Europe is at least stable and in a position to start growing again.

And the new oil is all shale oil which requires horizontal drilling and extensive frakking, both very expensive processes. So a lower price will in the short term slow down or stop new development of shale oil reserves. And the world's economy growing will increase demand and therefore oil prices. The OPEC countries with their existing production can fulfill this increase in demand and try and balance it to the point that prices don't increase enough to trigger another surge in shale oil development.

A complex strategy, but it has worked before.
 
Likes: 1 person
Nov 2012
40,757
11,753
Lebanon, TN
#5
I think this is a medium term strategy by OPEC to cause higher and more stable prices. Although there is lots of variability in this, there does appear to be a weak but still a concensus that China and India will stabilize and return to growth, hopefully at a more manageable rate. There are signs that the worst is over for Japan. The US is doing better and better and Europe is at least stable and in a position to start growing again.

And the new oil is all shale oil which requires horizontal drilling and extensive frakking, both very expensive processes. So a lower price will in the short term slow down or stop new development of shale oil reserves. And the world's economy growing will increase demand and therefore oil prices. The OPEC countries with their existing production can fulfill this increase in demand and try and balance it to the point that prices don't increase enough to trigger another surge in shale oil development.

A complex strategy, but it has worked before.

Supply and demand. We increased domestic supply, which lowered the demand for Middle Eastern oil.

Price corrected to meet the supply.
 
Apr 2013
38,050
26,062
La La Land North
#6
Supply and demand. We increased domestic supply, which lowered the demand for Middle Eastern oil.

Price corrected to meet the supply.
Right, but this adjusted price won't support any new heavy oil development and not many shale oil plays, so supply will correct downwards, leading to higher prices. Throw in a bit of political uncertainty in producing nations and the roller coaster continues.
 
Likes: 2 people
Nov 2012
10,825
9,017
nirvana
#7
Right, but this adjusted price won't support any new heavy oil development and not many shale oil plays, so supply will correct downwards, leading to higher prices. Throw in a bit of political uncertainty in producing nations and the roller coaster continues.
There won't be any higher prices anytime soon, and if Saudi Arabia votes no to cut production again next year, the slide in prices could happen for a long time.
Sucks to be you if you're in the shale oil business. What I want to see are Republicans in this country try to sell to Americans paying higher gas prices is in their best interests, after selling to them energy independence. It isn't going to help their cause on finishing Keystone either. Or Canada's for that matter. Falling oil prices are also having the added benefit of strengthening the USD, while at the same time causing gold prices to plummet. Bad news for oil and gold speculators. Who a lot of are now losing their asses on investments they made last year. My heart just bleeds peanut butter for them.
 
Nov 2012
40,757
11,753
Lebanon, TN
#8
Right, but this adjusted price won't support any new heavy oil development and not many shale oil plays, so supply will correct downwards, leading to higher prices. Throw in a bit of political uncertainty in producing nations and the roller coaster continues.
I think that is the point of the price cut. Price the competition out of business.
 
Apr 2013
38,050
26,062
La La Land North
#9
I think that is the point of the price cut. Price the competition out of business.
A picky but significant point. They didn't cut the price, they can't do that without totally screwing up the system. They continued to produce at high rates which then has the effect of causing lower prices through supply and demand forces.

It is not a matter of price fixing or control, it is a matter of production control.
 
Apr 2013
24,581
11,615
The Milky Way
#10
Their production control is a bit of a farce as they produce more than they [OPEC nations in general] admit. Nonetheless their target: U.S. fracking. The government needs to make certain, and it is surely doubtful that Obama would do this, that there is no negative impact on increasing U.S. production. IOW, we need maintain certain price structure to keep our production growing, by whatever reasonable means at our disposal.

http://www.bloomberg.com/news/2014-...-u-s-shale-crash-russian-oil-tycoon-says.html

I see no reason to believe that any policy of the current administration has the interests of American production, we know that Obama hates oil. What will the 114th Congress do?

 
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