What’s for sure is that the billions of dollars are not stuffed under a mattress. In a recent report, Saudi Arabia alone holds a 878 billion-dollar portfolio of of foreign assets. To put this figure in perspective, it is comparable to the entire GDP of Turkey in 2007 (IMF Data).

That may not impress most people, but it implies significant economic ties between Saudi Arabia and the rest of the world. It may not be a physical relationship, but the ramifications are significant.

This figure, which, by the way, exceeds Saudi Arabia’s own GDP by 300 billion or so, represents the reality that the country can no longer aspire to a policy of isolation.  As mentioned in a previous post, this also presents a catch-22 situation for the state’s petro pricing policy. Whatever the implications are, one thing is for certain – Saudi Arabia’s welfare is absolutely inseparable from the rest of the world.

Bo-yun Liu

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December 4th, Syria agreed to cooperate with Cyprus in a bilateral deal for offshore oil-and-gas exploration, bypassing the objections of Turkey. Both sides expressed their willingness to sign agreements as soon as next week to define the undersea exploration. Turkey disagreed because it believes that it has claims to that area, and that Cyprus is not facilitating the representation of all the parties in this conflict. Turkey has been accused by Cyprus of undercutting the ongoing oil exploration and only time will tell its response to this agreement between Syria and Cyprus.

Samuel Anene

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According to OPEC, the market is flooded with oil right now and demand is dropping faster than anticipated. This has led to a drop of over 60% in the price of oil since July.

Is OPEC’s concern for the oil market based on a desire to help the global financial situation, which Ghanem said was in shambles, or is it rather to increase profits for the member countries, many of whom rely on oil revenues to fund social works in their countries? Although OPEC may have the international economy’s interest at heart, when a cartel meets and determines to cut production, many see something different.

David Crowley

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Zwara Oil Refining Company, or ZORCO, has made HSBC the financial adviser to a crude oil refinery expected to be built in Zwara, located in northwest Libya.

ZORCO is owned by Tamoil Africa Holding, which is in turn owned by the Libya Africa Investment Portfolio. This ultimately means the Libyan government has ownership. Important to note is that this will be the first large project sponsored by the government that will be commercially financed.

When done, the refinery “will be producing refined oil products targeting the local, regional and international markets, and is expected to benefit from Tamoil’s, and its sister company Libya Oil Holding’s extensive distribution network in Africa and regionally.”

This refinery is also expected to be the greenest and most environmentally conscious refinery ever built.

Sarah Dada

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Bridget Russell

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David Crowley

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The collapse of oil price puts pressure on many of the OPEC countries, who depend on oil exports for revenue. Saudi Arabia, for instance, noted that $75 a barrel oil will insure continued investments in petroleum infrastructure projects. At the present level, investments have frozen and will likely threaten future supplies.

Venezuela and Iran, on the other hand, would like to see oil in the $90 range as they depend on oil revenue to prop-up domestically unpopular regimes.

In the upcoming meeting, OPEC will likely face one of the toughest challenges in the cartel’s history. On one hand, all countries could benefit from higher prices, but that necessarily means cutting production, which some countries may not be willing to do. In addition, current oil prices may help economic giants such as the US avoid a deep recession and in turn stimulate future demand. Should the cartel focus on short-term price goals or long-term demand?

Given the conflicting nature of the issue, the meeting in Algeria probably won’t be pretty. Who will Hugo Chavez call “facista” next? And how do you say “¿Porque no te callas?” in Arabic?

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Crude oil prices are down 66% from a record $147.27 a barrel set on July 11^th, with slowing global demands leaving a 1 million barrel-a-day oversupply that needs to be removed by the end of the year.

OPEC is set to discuss compliance with a previous cut, on November 29^th in a meeting in Cairo. “We won’t have production data yet, but at least we can consult with each other. It does not mean we can’t take a decision,” Ghanem said. He also stated that they are “worried about the direction of prices” and that they “need to see if the oil price is falling because liquidity is leaving the market, or if there is too much oil in the market.” He concluded by mentioning that OPEC’s main goal is to stabilize the market.

UPDATED HERE

Roy Dickson

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Iraqi oil minister, Hussain Shihristani, has declared that these contracts will not be recognized as legitimate by the central government in Baghdad, even though earlier in the week there was word of an agreement between the oil ministry and the KRG that oil would be allowed to be exported from the territory of Kurdistan to neighboring Turkey.

The Iraqi oil ministry maintains that oil revenues from crude oil extracted from anywhere within the nation’s borders should go directly to the central government in Baghdad for redistribution around the entire country. As Kurdistan has gained an exceptional amount of autonomy compared to ethnic enclaves in other nations, it will be interesting to see how exactly the Iraqi government plans to enforce its will and negate these contracts.

Haley Hackendale

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Brad Keenan

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