The de facto leader of OPEC has told the press production of oil will not be reduced even if the prices fall to $20 a barrel.
Ali al-Naimi, Saudi Arabia’s Oil Minister, is basically telling the world that the group is now focused on maintaining their market share in light of the U.S. shale oil boom.
“It is not in the interest of OPEC producers to cut their production, whatever the price is,” al-Naimi told the Middle East Economic Survey. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”
The most shocking comment from the man who is considered one of the most influential figures on the oil market was that the world may never see $100 a barrel oil again.
“We have entered a scary time for the oil market and for the next several years we are going to be dealing with a lot of volatility,” Jamie Webster, oil analyst with IHS Energy told the Financial Times. “Just about everything will be touched by this.”
Oil prices have tumbled almost 50 percent since June because of both a huge supply gain from U.S. shale output along with decreased demand in Europe and Asia. The market dove more than a dollar after the comments from al-Naimi.
OPEC had been well known for cutting production when oil prices fall in an attempt to keep up profit margins. When the U.S. was in the midst of recession in 2008, OPEC cut production to raise prices to make it harder on the U.S. during the economic downturn.
The world’s oil market is o the verge of collapse according to experts at Bank of America.
The bank warned that the OPEC oil cartel has essentially collapsed and that prices will fall below $50 dollars a barrel. The weakest oil producers will be run from the industry and power will consolidate into a handful of producers.
“The consequences are profound and long-lasting,“ bank commodity chief Francisco Blanch told the London Daily Telegraph.
The move could drive many American oil producers out of the business. At least 15 percent are unable to cover costs at the current oil price level and experts say that when prices fall below $55 a barrel over half the American producers will be forced to shut down.
The benefit then comes to middle east powerhouses such as Saudi Arabia which have large cash reserves that can help them weather a prolonged decline in oil prices.
Bank of America’s competitor Citibank has posted an opposite view, saying American shale oil producers can withstand as low as $40 a barrel.
Israeli officials say that an oil spill Wednesday night is one of the worst environmental disasters to strike the country.
The accident on the Eilat-Ashkelon pipeline caused crude oil to flood 200 acres of a desert reserve about 12 miles north of the Red Sea.
The slick reportedly has run into ravines and pooled there, avoiding the rare trees and plants in the majority of the park. The spill is not expected to be able to reach the Red Sea unless major rainstorms were to hit the region.
“Rehabilitation will take months, if not years,” Environment Ministry official Guy Samet told Israel Radio.
The oil will be collected with suction equipment and government officials say they will likely collect contaminated earth as well.
World oil prices are continuing a downhill slide amid fears the world economy is slowing and could go back into recession.
Brent crude oil fell to near four-year lows and the US standard, West Texas Intermediate, lost more than a dollar. Brent has lost almost 28 percent of its value since June.
The slide comes as economic news makes it appear the world is facing another slowdown or possible recession. China’s consumer inflation fell to a five-year low this week and prices for U.S. producers fell for the first time in a year.
Also, US crude oil inventories rose at a level almost four times higher than previously estimated by analysts.
The news led to downward rallies on Wall Street with the Dow losing hundreds.
World leaders from oil producing countries are calling for emergency meetings to try and stop the slide in oil prices. The International Energy Agency is cutting predictions for oil growth in 2015 as a result of the recent conditions.
A member of the National Transportation Safety Board is calling tank railroad cars an “unacceptable public risk”.
The cars have come into the spotlight after two major accidents in the last year.
The DOT-111 cars were involved in a derailment in Casselton, North Dakota that caused a massive fire that burned more than 24 hours. An accident involving the cars in Lac-Megantic, Quebec caused a massive explosion that killed 47 people and destroyed 30 buildings.
The NTSB has been issuing warnings about those cars and calling for their replacement or retrofitting since 1991. Efforts to create actual tougher regulations for railcars didn’t get underway until almost 20 years later.
“Right now, there is so much uncertainty that people aren’t going to make investments in safer cars and they’re going to keep running these crummy cars and killing people,” Representative Peter DeFazio of Oregon said.
Burlington Northern Santa Fe Railroad said they are not going to wait for increased regulations from the NTSB. They put out a call for bids for 5,000 new tankers with a higher level of stability and security.
The NTSB is concerned because of how often oil cars pass through or very close to cities and towns.
Parts of the Mississippi River were shut down Sunday and remained closed Monday after a weekend collision spilled gallons of sweet crude oil into the river.
A 65-mile stretch of the river is closed to traffic and a Coast Guard spokesman said they are working with local officials and cleanup crews to see when the river might be able to re-open to traffic.
As of Sunday night, 26 vessels were waiting to go up or down river. Officials stopped barge traffic in an attempt to keep the oil from spreading in the river and to keep the oil from contaminating passing vessels.
A barge being pushed by a tugboat collided with another barge carrying grain to cause the spill.
Public drinking water intakes on the river were shut and local officials say they were closed in time to keep the oil from contaminating drinking water systems.
The Port of New Orleans is closed because of the spill although two cruise ships were permitted to leave the ports to being their sea voyages.
Consumers love falling oil prices because of the corresponding drop in gas prices at the pump.
However, a significant slide in the price of oil could end up causing major civil unrest in the Middle East and other oil producing nations according to multiple economists and researchers. Continue reading →