By Clifford Krauss And Stanley Reed, NY Times, May 31, 2015
HOUSTON–The international cartel of oil producers has long followed the same basic strategy. When the market was soft, the group slashed production to raise prices.
But Saudi Arabia, the heavyweight of the Organization of the Petroleum Exporting Countries, has a new agenda. It is now less concerned about the price of crude oil in the global markets and more concerned about delivering fuel to its growing economy.
The shift is upending the traditional market dynamics that have influenced the direction of oil prices for decades.
While American producers are pulling back in the face of the current weak prices, Saudi Arabia, the largest OPEC producer by far, has been pumping more and more barrels. Saudi Arabia’s daily production in March and April nearly equaled its record output in 1980 when prices were soaring.
The country’s allies, Kuwait and the United Arab Emirates, are also drilling at record rates, while Iraq is shrugging off widespread civil conflict to increase production. Even Iran is preparing plans to develop more oil fields.
The surging output has taken much of the mystery out of what the delegates of the 12 OPEC countries will do when they assemble in Vienna this week to set production levels for the next six months. They have already pushed the cartel’s output 3 percent above the current target, and production appears to be heading even higher.
The acute pressure to cut production is also off. Oil prices, after a sharp drop over the last year, have stabilized somewhat at more than $60 a barrel.
“No cut is coming,” said René G. Ortiz of Ecuador, a former secretary general of OPEC. “Each and every country, and particularly the Saudis and the other monarchies of the gulf, will protect their market share and increase their market share as much as possible.”
HOUSTON–The international cartel of oil producers has long followed the same basic strategy. When the market was soft, the group slashed production to raise prices.
But Saudi Arabia, the heavyweight of the Organization of the Petroleum Exporting Countries, has a new agenda. It is now less concerned about the price of crude oil in the global markets and more concerned about delivering fuel to its growing economy.
The shift is upending the traditional market dynamics that have influenced the direction of oil prices for decades.
While American producers are pulling back in the face of the current weak prices, Saudi Arabia, the largest OPEC producer by far, has been pumping more and more barrels. Saudi Arabia’s daily production in March and April nearly equaled its record output in 1980 when prices were soaring.
The country’s allies, Kuwait and the United Arab Emirates, are also drilling at record rates, while Iraq is shrugging off widespread civil conflict to increase production. Even Iran is preparing plans to develop more oil fields.
The surging output has taken much of the mystery out of what the delegates of the 12 OPEC countries will do when they assemble in Vienna this week to set production levels for the next six months. They have already pushed the cartel’s output 3 percent above the current target, and production appears to be heading even higher.
The acute pressure to cut production is also off. Oil prices, after a sharp drop over the last year, have stabilized somewhat at more than $60 a barrel.
“No cut is coming,” said René G. Ortiz of Ecuador, a former secretary general of OPEC. “Each and every country, and particularly the Saudis and the other monarchies of the gulf, will protect their market share and increase their market share as much as possible.”
1 Comments:
Some believe that the high production is an attempt to bring down the Russian economy by anti Russian international powers.It's a way to get Russia to submit to the Internationalists and their agenda. Russia's economy is dependent on the sale of gas and oil, when prices are low as they are now, their economy suffers and could even collapse. Could it be that the Internationalists, our puppeteer string pullers, are pulling the Saudis strings to dance to their desires and to Russia's demise?
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