Saudi Arabia Caught Between Oil Hawks and The West
Kuwait City – Under pressure from OPEC price hawks, Saudi Arabia reluctantly agreed to a mild cut in oil output, but the world’s top exporter will do what it takes to keep the market balanced, analysts said on Thursday.
The kingdom, which pumps one-third of OPEC production, is caught between the organization’s hawks pressing for deeper cuts to shore up falling prices and US-led Western consumers demanding more supplies, analysts said.
Following a marathon meeting on Tuesday, the oil producer cartel sprang a surprise by deciding to cut crude production by 520 000 barrels per day (bpd). The cut will not affect official output quotas of member countries, currently at 28.8 million bpd, but aims at taking extra production off the market. Most countries have been overproducing, Harami said, and to implement the decision all of them would have to reduce output.
Ahead of the meeting, Saudi Oil Minister Ali al-Nuaimi said the oil market was “fairly well balanced,” giving the impression that production levels would remain unchanged. Traditional price hawks Iran and Venezuela led calls for a production cut and were assisted by Algeria and Libya.
“Yes. The kingdom came under pressure … but the 520 000 bpd cut will not have a major impact on prices, because there is up to two million bpd of surplus crude on the market,” Saudi economist Ali al-Dakkak said.
Oil prices fell further on Thursday.
Brent North Sea crude for delivery in October dropped 56 cents to $98.41 a barrel.
New York’s main contract, light sweet crude for October, slid 51 cents to $102.07
Though those us living in the developed nation are well aware of OPEC’s impact on the oil market and our pocket books, few of us know about the internal politics of the cartel.
As far back as I can remember, OPEC has always spoken with a uniform voice. So this is an interesting development.
Will the forces of disagreement be strong enough to weaken the clout of the cartel? Despite the cut, oil is continuing its slide today.
Are traders going to pour over OPEC meeting transcripts looking for key words and phrases indicative of a potential cut or boost in production?
It will be an interesting development to watch.
Boyun Liu
