August 23, 2019

Oil Price Watch November 19th 2011

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The Brent oil price fell significantly by more than $7 this week, there is an interesting post by Reuters which illustrates some of the short-term reasons for this, as well as some medium to longer term issues – including crucially Issue 5 (limited effectiveness of cartels) in the Oil Price Watch Overview

The conflicting pressures within the Organization of the Petroleum Exporting Countries (OPEC) were reflected in the Reuters report with the Saudi oil minister Ali al-Naimi indicating at the weekend that “The global oil market looks balanced” while in contrast the secretary general of OPEC said some producers need to cut back.

Reuters noted that oil supply from OPEC member Libya has risen more rapidly than many expected, while OPEC has trimmed its demand outlook, this leading to what Reuters calls “OPEC price hawk Iran” to call for Gulf OPEC producers to cut to pre-Libya crisis volumes.

But Reuters also points out Saudi Arabia, Kuwait and the United Arab Emirates (UAE) have raised their supply over the last few months to compensate for the loss of Libyan oil. These OPEC members failed to convince OPEC to lift its group production target in June to benefit global economic growth, a move which was blocked by Iran and Venezuela, among others.  As Reuter notes “the last (OPEC) meeting ended in acrimony”.

Limited effeciiveness of cartels? You do not have to look further than the world’s biggest cartel to see that principle in action

Price at end of week: $107.56 (down from $114.57
end of last week)

Read the Oil Price Watch Overview here