Prices on the oil market continue to nosedive: Brent shed nearly $2 yesterday alone, and this morning is trading at under $98 per barrel at a level it last fell below in April 2013, and before that in July 2012 (Chart of the Day). The oil price for the OPEC crude oil basket is also likely to have fallen to its lowest level since early July 2012. It thus seems reasonable to doubt that OPEC still feels that the oil price is “good” for producers and that “everyone is happy”, as the cartel had announced back in June at its meeting in Vienna. Indeed, OPEC already appears to be responding to the threat of oversupply on the market and tumbling oil prices. Yesterday’s OPEC report reveals that Saudi Arabia – in contrast to information provided by secondary sources – stated when asked directly that it had reduced its crude oil production in August by 408,000 barrels per day as compared with the previous month. Such cuts are also urgently needed in view of growing production in the US and Libya. According to the NOC, Libyan oil production climbed to 810,000 barrels per day recently, an increase of 600,000 barrels as compared with the low it recorded in April.
All the same, further cuts would need to be made by OPEC in order to balance the oil market and allow a long-term price recovery. Given the high oil revenues required by its national budget and the lowering of the sales prices of its oil in October, however, it is questionable whether Saudi Arabia is already prepared to take such a step. The latest OPEC forecasts published at midday likewise weighed on prices, OPEC following the US Energy Information Administration’s lead from the day before: the prospects for US crude oil production were increased, while the forecast for global oil demand was simultaneously revised downwards, albeit only slightly.
