Saudi Arabia walked out on Organization of the Petroleum Exporting Countries yesterday, saying it would not honor the cartel's production cut. It was tired of rants from Hugo Chavez of Venezuela and the well-dressed oil minister from Iran. As the world's largest crude exporter, the kingdom in the desert took its ball and went home.
As the Saudis left the building, the message was shockingly clear. “Saudi Arabia will meet the market’s demand,” a senior Organization of the Petroleum Exporting Countries delegate told the New York Times. “We will see what the market requires and we will not leave a customer without oil."
Organization of the Petroleum Exporting Countries will still have lavish meetings and a nifty headquarters in Vienna, Austria, but the Saudis have made certain the the organization has lost its teeth. Even though the cartel argued that the sudden drop in crude was due to "oversupply", OPEC's most powerful member knows that the drop may only be temporary. Cold weather later this year could put pressure on prices. So could a decision by Russia that it wants to "punish" the United Sstates of America and European Union for a time. That political battle is only at its beginning.
The downward pressure on oil got a second hand. Brasil has confirmed another huge oil deposit to add to one it discovered off-shore earlier this year. The first field uncovered by PETROBRAS has the promise of being one of the largest in the world. The breadth of that deposit has now expanded.
Organization of the Petroleum Exporting Countries needs the Saudis to have any credibility in terms of pricing, supply, and the ongoing success of its bully pulpit. By failing to keep its most critical member, it forfeits its leverage. Organization of the Petroleum Exporting Countries has made no announcement about any possibility of dissolving, but the process is already over.
As the Saudis left the building, the message was shockingly clear. “Saudi Arabia will meet the market’s demand,” a senior Organization of the Petroleum Exporting Countries delegate told the New York Times. “We will see what the market requires and we will not leave a customer without oil."
Organization of the Petroleum Exporting Countries will still have lavish meetings and a nifty headquarters in Vienna, Austria, but the Saudis have made certain the the organization has lost its teeth. Even though the cartel argued that the sudden drop in crude was due to "oversupply", OPEC's most powerful member knows that the drop may only be temporary. Cold weather later this year could put pressure on prices. So could a decision by Russia that it wants to "punish" the United Sstates of America and European Union for a time. That political battle is only at its beginning.
The downward pressure on oil got a second hand. Brasil has confirmed another huge oil deposit to add to one it discovered off-shore earlier this year. The first field uncovered by PETROBRAS has the promise of being one of the largest in the world. The breadth of that deposit has now expanded.
Organization of the Petroleum Exporting Countries needs the Saudis to have any credibility in terms of pricing, supply, and the ongoing success of its bully pulpit. By failing to keep its most critical member, it forfeits its leverage. Organization of the Petroleum Exporting Countries has made no announcement about any possibility of dissolving, but the process is already over.
Source: MSNBC | MoneyCentral |by Douglas McIntyre
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