“The council (of ministers)… stressed the kingdom’s role in (achieving) the stability of the oil market and its continuous readiness and efforts to cooperate with all OPEC and non-OPEC countries to maintain the stability of the market and prices”, the cabinet said.
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On grain markets, Argentina’s election of a president who promised to cut export taxes and boost production in the farming powerhouse sent USA soybeans to a 6-1/2 year low. Algeria has asked for a price floor while the oil minister of Ecuador has said that cutting production is the only way of balancing the market.
As Opec heads into the December 2015 meeting, Venezuela, despite vast oil reserves estimated to exceed 290 billion barrels, has been marginalised within Opec. Recently, Saudi Arabia’s and Iraq’s production fell due to annual maintenance season. And OPEC member Venezuela raised the idea of returning to a program of keeping oil prices within a set range.
Oil traded near $42 a barrel as Saudi Arabia reiterated its commitment to work with OPEC members and other producers to stabilize the crude market.
Their decision at the time was defensible, but it was risky.
Oil prices retreated Wednesday as official data revealed another rise in USA crude stockpiles, adding to concerns about a global supply glut. When oil prices are below $50 there is not enough funds to cover government expenses and other costs.
In fact, that’s exactly what happened. Saudi Arabia has maintained a peg to the dollar for years, but low oil prices are putting a lot of pressure on the regime, depleting foreign exchange. The price would make a move back to $60/bbl, but each time crude has tried to make a run this year it has returned to that floor. The South American nation is suffering worse than any of its OPEC members. “It hasn’t played out as they intended but they’re locked into it now”, Priddy said. They deeply cut expenses. “They are already producing more than that now”. That means all but the weakest have been able to survive OPEC’s price war. It is hard to see Saudi Arabia doing an about-face at this point on its strategy.
Losses in nickel and zinc reflect weakness in China’s vast steel sector and come despite major Chinese zinc smelters saying they would slash output by 500,000 tonnes next year, nearly a fifth of their output. “We’re seeing a big recovery in the USA and Saudi Arabia is following the tracks”.
I predicted in January that the price of West Texas Intermediate (WTI) would not close this year below $40/bbl.
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“We are destroying the price of crude oil; the speculative market is the one that is controlling the market”. Join us at The Energy Strategist to see which stocks are at the top of my year-end shopping list.
