OPEC kingpin Saudi Arabia said the Organization of Petroleum Exporting Countries wouldn’t budge on its decision not cut production, even if oil hits $20 a barrel. It also said the world may never see $100 a barrel ever again.
Oil prices slid back to around $60.20 per barrel on December 23. WTI crude futures dipped back to $55.67. On December 22, Brent prices first jumped to almost $63 a barrel on the back of strong international market performances before sliding back to not much over $60 after Saudi Arabia said the oil cartel would not cut production at any price.
“It is not in the interest of OPEC producers to cut their production, whatever the price is,” the Middle East Economic Survey quoted Saudi Arabia’s Oil Minister Ali al-Naimi as saying. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”
Saudi Arabia is the world’s largest oil producer, and is also the most dominant force in OPEC.
“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,”Naimi said.“Just about everything will be touched by this.”
Some analysts believe that Riyadh was behind the decision to keep prices low, in order to squeeze out other competitors. The majority of OPEC members are now selling oil at a loss.
Low oil prices are bad news for exporters, especially Russia, which has forecast GDP will fall 4.7% next year if oil prices stay at $60.
On the flip side, it’s good for customers, especially in the US and Europe, giving consumers an early Christmas gift. Petrol prices in Spain have dropped almost a 3% in the last week reaching its minimum value in 2014.
Chris Weafer, a senior partner at Macro-Advisory in Moscow, told New Europe on December 22 that it is nonsense to say that Saudi or other Arab Gulf producers are colluding with the US to hurt Russia and Iran. “OPEC has always knows that Russia would never cut production and will always pump at maximum no matter what the price of crude. At the current oil price Saudi’s daily budget shortfall, i.e. to breakeven, is approximately $200 million. That’s an expensive favour to do the US – or anyone,” Weafer said.
“Reminding US shale investors that prices can go down as well as up and twisting the financial pressure on Iran are satisfying side benefits for Saudi, UAE and Kuwait. But this issue appears to be mostly about getting all member states to share in the required price supporting cuts. All three of these states, historically known as the ‘swing-producers’ have considerably more reserves than the others and can survive low oil for longer,” Weafer said.
http://www.neurope.eu/article/saudi-arabia-sees-end-100-oil