The Oil and Energy Insider reported recently that Oil
prices continued to fall this week on ample supply and signals from
OPEC members Saudi Arabia and Kuwait that they can deal with lower
prices and are unlikely to reduce output.
On Monday, Brent crude futures dropped further to $87.74 a barrel—the lowest level since December 2010--while WTI futures were down to $84.68 a barrel. Saudi Arabia, for its part, has suggested it could handle $80/barrel prices. On Tuesday, Brent crude prices slipped further, to $87.03.
Kuwait has also said that it will not be cutting output and predicted prices falling to as low as $76 a barrel before winter sets in and prices start to rise again.
The next OPEC meeting is scheduled for 27 November, when the organization will consider targets for 2015.
But it’s not about whether high oil prices or low oil prices are good—it’s about maintaining the proper balance (as is everything).
When oil prices fall below $100 a barrel, the OPEC countries have a hard time balancing their budgets, which are largely dependent on oil revenues.
There has also been some confusion in the ranks this week, with Saudi Prince Alwaleed bin Talal al-Saud publishing an open letter on his website expressing disbelief at media reports that Saudi Arabia would allow oil prices to fall below $90 a barrel. The Prince--most fondly known for dwarf-tossing parties and his investments in Apple, Time-Warner, and News Corp.--warns that 90% of Saudi Arabia’s budget is reliant on oil revenues and that a continued fall in prices would be catastrophic.
In the meantime, OPEC-member Venezuela has been on the other side of the output-cut divide, calling for an emergency meeting of the group to respond to falling prices. But Kuwait and Saudi Arabia aren’t budging.
While Kuwait and Saudi Arabia can clearly survive a couple more months of low oil prices—hence their unwillingness to cut output—Russia will find it more difficult. As the Economist notes this week, while Russia’s economic growth is already poor, “further drops in the oil price could be very painful. After all, oil and gas make up 70% of Russia’s exports and half of the federal budget.”
The ample supply is largely due to surging production from Russia and the US, and the American shale boom has been threatening to overtake Saudi Arabia’s own output. With this in mind, Saudi Arabia has less incentive to reduce output to boost prices.
Back at the pump in the US, the falling oil prices are cause for celebration, though.
This past week, the average retail price of gasoline fell 0.9 cents a gallon to $3.177—the lowest since February 2011--according to AAA. Overall, gas prices have fallen more than 50 cents this year.
EU-Digest
On Monday, Brent crude futures dropped further to $87.74 a barrel—the lowest level since December 2010--while WTI futures were down to $84.68 a barrel. Saudi Arabia, for its part, has suggested it could handle $80/barrel prices. On Tuesday, Brent crude prices slipped further, to $87.03.
Kuwait has also said that it will not be cutting output and predicted prices falling to as low as $76 a barrel before winter sets in and prices start to rise again.
The next OPEC meeting is scheduled for 27 November, when the organization will consider targets for 2015.
But it’s not about whether high oil prices or low oil prices are good—it’s about maintaining the proper balance (as is everything).
When oil prices fall below $100 a barrel, the OPEC countries have a hard time balancing their budgets, which are largely dependent on oil revenues.
There has also been some confusion in the ranks this week, with Saudi Prince Alwaleed bin Talal al-Saud publishing an open letter on his website expressing disbelief at media reports that Saudi Arabia would allow oil prices to fall below $90 a barrel. The Prince--most fondly known for dwarf-tossing parties and his investments in Apple, Time-Warner, and News Corp.--warns that 90% of Saudi Arabia’s budget is reliant on oil revenues and that a continued fall in prices would be catastrophic.
In the meantime, OPEC-member Venezuela has been on the other side of the output-cut divide, calling for an emergency meeting of the group to respond to falling prices. But Kuwait and Saudi Arabia aren’t budging.
While Kuwait and Saudi Arabia can clearly survive a couple more months of low oil prices—hence their unwillingness to cut output—Russia will find it more difficult. As the Economist notes this week, while Russia’s economic growth is already poor, “further drops in the oil price could be very painful. After all, oil and gas make up 70% of Russia’s exports and half of the federal budget.”
The ample supply is largely due to surging production from Russia and the US, and the American shale boom has been threatening to overtake Saudi Arabia’s own output. With this in mind, Saudi Arabia has less incentive to reduce output to boost prices.
Back at the pump in the US, the falling oil prices are cause for celebration, though.
This past week, the average retail price of gasoline fell 0.9 cents a gallon to $3.177—the lowest since February 2011--according to AAA. Overall, gas prices have fallen more than 50 cents this year.
EU-Digest
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