Representatives of Saudi Arabia, the United Arab Emirates and Kuwait in the last six weeks several times emphasized that the group does not intend to limit extraction to stop the biggest drop in oil prices since 2008 year. Estimates for the oversupply of Qatar are among the highest among oil producing countries. Barclays and Commerzbank these countries want – and the purpose of reach – a further fall in prices and is an attempt to accelerate the reduction of the role of US offshore oil shale.
In the past year the price of oil fell by 48 percent, and since the OPEC confirmed Nov. 27 target level of output, the decline was 35 percent. This decision, although it leads to a reduction in income member countries of OPEC in 2015, aims to preserve in the coming years, the organization of the market share.
– The faster you will decrease the price, the faster react production in the United States, these are the expectations and that OPEC member countries are hoping – said Jamie Webster, an analyst with consulting firm IHS in Washington. – I do not recall there ever a few Member States have sought so far to reduce prices.
Total production of oil in the United States last week amounted to 9.13 million barrels and an increase of one million barrels compared to the previous year and 49 000 from the November meeting of OPEC. Over the past five years, horizontal drilling and hydraulic fracturing technology allowed to increase production by 66 percent. Exports, still limited provisions, reached in November 502,000 barrels a day, according to the EIA (Energy Information Administration).
Four member states of OPEC in the Middle East are counting on capital reserves estimated by the International Monetary Fund to 826.4 billion dollars., which will allow them to survive the fall in prices. Oil provides 63 percent of their exports. Ministers. Oil these countries responded to the targeted 7 and 8 January requests for comment.
The fall in prices oil will cost this year, all 12 OPEC countries, including $ 257 billion in lost revenue, according to the EIA. According to the CMA, the company providing the data belonging to McGraw Hill Financial, Venezuela’s chances of insolvency within the next five years amounts to 93 percent. President Nicolas Maduro said on December 13 that “such a possibility is not an option”, and January 7 said that the country “has the ability to obtain the necessary funds.”
OPEC will not change strategy, even if oil prices fall to $ 20 a barrel or countries outside the organization gets a proposal to reduce the production, said Dec. 21 Ali Al-Naimi, Saudi Minister. oil in an interview for “Middle East Economic Survey”. He added that the country may even increase production, if they do that countries outside the organization. According to estimates of Qatar, the world surplus amounts to 2 million barrels per day, or 6.7 percent of OPEC extraction.
The organization maintains its decision to restrict the extraction, even if there is a further fall in prices and wait at least three months, it will consider an extraordinary meeting, said Dec. 14 energy minister of the United Arab Emirates Suhail Al-Mazrouei. In his opinion, the elimination of surplus may take years, announced January 6 newspaper “The Nationa” based in Abu Dhabi.
OPEC does not plan an extraordinary meeting before the scheduled conference in June, said Dec. 16 Kuwaiti Minister. oil Ali Al-Omair. According to him, the prices will improve in the second half of the year, because the producers of the highest costs of extraction will be forced to reduce production.
It would not be the first time that an American mining companies are drawn to the fight against OPEC for market share. In 1986, Saudi Arabia turned on the taps and resulted in four months prices fell by 67 percent to just over $ 10 per barrel. US oil sector collapsed, causing lasting nearly a quarter-century decline in production, and the Saudis have regained the lead in the global oil market.
– Apparently, in the interest of OPEC is fast, not gradual decline in prices – said in a telephone interview Miswin Mahesh, an analyst at Barclays in London. – The rapid decline will cause greater changes in the supply of non-OPEC countries, and gradually allow companies in countries outside of the organization to strengthen and improve efficiency.
Not everyone shares this view. UBS analysts believe that the accelerating decline is not a practical strategy, because oil demand and supply react too slowly to it could have an impact on price changes.
“I do not think OPEC was about lowering prices – wrote in an e-mail with Giovanni Staunovo January 5, an analyst at UBS in Zurich. – In the short periods of supply and demand are inelastic. “
On the ICE Futures Europe at 13 54 time New York futures brent crude for delivery in February lost 1.5 percent (78 cents), and fell to $ 50.18 per barrel. Finally reached the price of $ 48.90 – the lowest level since April 2009.
Ministers. Oil Saudi Arabia tried to undermine the public statements by the price of oil in the 80s and 90s, Amy Myers Jaffe believes, Executive Director for. power and stability of the University of California-Davis. In her opinion, tactics were used to force the other member states to agree to changes in mining plans.
Evidently, OPEC policy is beginning to prove. Baker Hughes announced Jan. 5 on its website that the number of drilling rigs in the United States declined for the seventh time in seven weeks, and last week at 17 and is now 1 482. In 2015, it can be a serious decline in investment in the American sector shale oil, said Fatih Birol December 22, an economist at the International Energy Agency, based in Paris.
“Some OPEC member countries, especially those of the Gulf, apparently are convinced that a better end than annoyance annoying endless – wrote in an e-mail from Frankfurt Eugen Weinberg, head of commodity market analysis Commerzbank. – Recent statements indicate that they do not give up on this strategy. “
Grant Smith
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