Tag Archives: OPEC

OPEC Leader Vows To Not Cut Output

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.

OPEC Collapsing Says Bank of America

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.