OPEC Price War

oil_prices futuresDiscord at OPEC is turning into a price war, loosening the cartel’s grip on the oil market and exacerbating a recent steep sell-off.

Fissures have widened as Mideast turmoil frays political alliances and producers vie for customers amid a flood of oil from the U.S. and slowing growth in Asia.

“No one is telling anyone what they are up to,” one Gulf oil official said.

Saudi Arabia this week unilaterally lowered the price it charges for crude scheduled for delivery next month—without the typical consultation with other members of the Organization of the Petroleum Exporting Countries, according to OPEC officials. The decision surprised many market watchers, who were expecting the Saudis to cut output to help boost prices, and sent prices hurtling lower.

Brent, the global oil benchmark, slid 1.2% Friday to $92.31, the lowest price since June 2012. Prices have tumbled 20% from their mid-June high.

The U.S. benchmark, West Texas Intermediate, settled down 1.4% Friday at $89.74, the lowest settlement since April 2013. U.S. prices have fallen 16% from their mid-June high.

The Saudi decision followed a similar move by the kingdom and Kuwait to lower prices for delivery this month, without informing other OPEC members, according to OPEC officials, effectively undercutting fellow members.

“If members don’t cooperate, which is likely, everyone is in trouble and prices will drop even further,” said another OPEC official from a Persian Gulf state.

Since its founding in 1960, OPEC has been rife with infighting among member states, which decide behind closed doors when to cut or boost their collective output to try to influence prices. But in recent months, divisions have deepened significantly, according to OPEC officials and analysts. That has weakened the group’s influence at a time when it is confronting some of the biggest challenges it has ever faced.

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