OPEC (the Organization of Petroleum Exporting Countries supplying over 40% of the world’s oil consumption) feels put upon. It’s Secretary General lashed out at the International Energy Agency for having categorized current oil prices as “alarming”, calling for OPEC to show more flexibility in boosting supplies (see CNBC “OPEC Says World Well Supplied, Criticizes IEA” 01.1811). OPEC’s Secretary General Abdalla Salem El-Badri immediately countered that “At the moment there is more than enough oil on the market… Oil prices have been driven by technical means... the weak dollar and speculation” all the while critical of the IEA for warning of the risks to economic growth due to rising oil prices.
It is significant that El-Badri’s comments come while OPEC’s official output quota has remained unchanged since instituting a record cut in its production in December 2008. December 2008 was a fateful moment for OPEC and the price of oil. At the time oil was hovering around $40/barrel and OPEC and its minions in the oil universe were rattled, to say the least. Even the Saudi monarch, King Abdullah got into maelstrom by promulgating that he considered $75 a barrel to be a “fair price” (please see “Big Oil Prices Put in Jeopardy by Fall in Oil Prices” New York Times 12.15.08).
But with the price at $40/bbl we were summoned to a far higher calling. You see, according to that font of wisdom on all matters oil, Saudi Oil Minister Ali al-Naimi instructed, “You must understand that the purpose of the $75 price is a much more noble cause. You need every producer to produce, and marginal producers cannot produce at $40 a barrel” (please see “OPEC’s Noble Cause” 12.17.08).
That was then, and the price was $40/bbl. This is now with West Texas Crude selling for over $90/bbl and London Brent crude selling just under $100/bbl at $98/bbl. More than a doubling of price since December 2008, shooting past Al Naimi’s “noble” and King Abdullah’s “fair” price of $75/bbl months ago.
The IEA opined in a report last Tuesday that OPEC would need to pump 400.000 barrels per day more than expected this year to balance the market.
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