| Submit your comments on this article | |
| Home Front Economy | |
| Oil prices tumble to $61 despite major slash in Opec output | |
| 2008-10-25 | |
| OPEC said yesterday it will slash oil output by 1.5 million barrels a day from November 1 as it seeks to shore up crude prices, triggering a verbal backlash from recession-threatened Britain and the United States. The White House denounced what it called OPEC's "anti-market" decision to cut production following the cartel's emergency meeting in Vienna, even though oil prices subsequently slumped to $61 on fears of a global recession. British Prime Minister Gordon Brown was left "disappointed" by OPEC's output reduction and urged oil producers to show a responsible attitude in the current crisis, his spokesman said. Analysts had expected the Organization of Petroleum Exporting Countries to cut its daily output by at least one million barrels per day as a global economic slowdown amid a worsening financial crisis reduces demand for energy.
Yet after OPEC agreed to reduce its official output quota to 27.3 million barrels per day, the price of Brent North Sea crude sank close to 61 dollars, the lowest point since March 2007. Crude futures in London and New York have plunged by almost 60 percent from record highs of above 147 dollars a barrel reached only three months ago when supply concerns sent prices soaring. "Crude oil is heading lower again... on fears that the (OPEC) cut might not be sufficient to compensate the shortfall of demand due to a global recession," said Dresdner Kleinwort analyst Peter Fertig. OPEC said in its statement published alongside its decision to cut production that "the financial crisis is already having a noticeable impact on the world economy, dampening the demand for energy, in general, and oil in particular." "Moreover, forecasts indicate that the fall in demand will deepen, despite the approach of winter in the northern hemisphere." However White House spokeswoman Dana Perino said the United States desired "markets to be well supplied." She added: "The high oil prices from the past year contributed to the slowdown in demand and the subsequent downturn in the economy, and we would ask that everyone keep that in mind." White House spokesman Tony Fratto said in reference to OPEC's cut: "It has always been our view that the value of commodities, including oil, should be determined in open, competitive markets, and not by these kinds of anti-market production decisions." In London, Prime Minister Brown's spokesman said "OPEC needs to consider the impact that the decision will have on the world economy." He added it was important "that all decisions that are taken by the oil producers are designed to ensure there is long-term stability in the price of oil and transparency in pricing." Brown had angered OPEC nations ahead of the Vienna meeting by saying that a cut in production would be "scandalous." | |
| Posted by:Fred |
| #13 Thanks! Always up for a little education. |
| Posted by: 49 Pan 2008-10-25 20:09 |
| #12 Where's the tariff to support a $60 floor in the USA? Are we going to whipsaw our producers and investors again? Hello, Congress? More expensive - less use. Isn't that what you Dems want? |
| Posted by: KBK 2008-10-25 15:28 |
| #11 Spam spam spam spam Spametty Spam, O Wonderful Spam! |
| Posted by: Thing From Snowy Mountain 2008-10-25 15:19 |
| #10 Description: Miami Roofing Distinguished Contracting Group -General and Roofing Contractor serving both the commercial and residential sectors of South Florida: Miami-Dade, Broward, Palm Beach, and Monroe counties. DCG's main area of expertise is roofing contractor. We work with roofing applications such as tile, flat, shingle, metal, and specializing in commercial flats. Miami roofing contractors Distinguished Contracting Group is a Florida State Certified General and Roofing Contractors company servicing Miami-Dade, Broward, Palm Beach, and Monroe counties Keywords: miami roofing, Miami roofing, miami roofers, broward roofing, fl roofing contractors, palm beach roofing, roofing boca raton, roofing companies miami, roofing company miami, roofing contractors miami |
| Posted by: philip 2008-10-25 15:11 |
| #9 There is a difference between cost to produce and cost to find and drill. Once oil has been found and the pumping rigs established the marginal costs are below $70. That oil will be pumped. What is more than $70 is the cost of exploring for, finding and then establishing the production platforms. What comes to a halt at prices under $70 is exploration and drilling for new fields. What also stops is attempts to convert tar sands, shale and coal to oil. |
| Posted by: DoDo 2008-10-25 13:35 |
| #8 It does not cost the Saudis anything close to $72 to produce a barrel of oil - unless you include the cost of supporting the Royal Family. It DOES cost $72 per barrel to produce the incremental barrel in the US and other super-mature producing areas (includes the cost of finding and developing as well as actually producing.) Small remaining pockets, ultra-deep water, oil shale & tar sands, enhanced recovery are quite expensive. Many such projects also have long lead times between big spending and start of production - the risk of change in prices during that multi-year period means succesful projects need high profit margins to compensate for the ones where the money was invested 'betting on' $140 oil but when the oil was finally produced it only could sell for $65. (Look at the 1982-98 period for examples.) |
| Posted by: Glenmore 2008-10-25 13:26 |
| #7 Ok, So how is it that the price of oil has dropped below the cost to produce it? Simple economics would force producers to slow and stop production until prices level off to a margin with profit, no matter how much we hate the Arabs. Threatening to cut producetion is media hype and actual cutting production is pure economics. It costs Saudi $72 a barrel to produce oil, or so we are told. Why would they even concider producing millions of barrels of oil at a $10 a barrel loss? The oil market was driven up by the same jerks that screwed the housing market up, Wall Street. Now it is resetting, like the housing market. The worlds oil market will settle, some countries will suffer and not be able to produce, I only hope that is Iran and the Russians. I would expect them to settle around the Saudi price margin, they seem to set the market. |
| Posted by: 49 Pan 2008-10-25 13:13 |
| #6 Venezuelan and Iranian production have fallen to the point where they can no longer produce up their quotas. That's why they're always in the forefront of calls for cuts. |
| Posted by: DoDo 2008-10-25 10:36 |
| #5 if Chavez needs $97 bbl and Iran needs $91.. IIUC, putin needs $95. Tough luck, vlad. |
| Posted by: anonymous5089 2008-10-25 10:06 |
| #4 Quagmire! |
| Posted by: anonymous5089 2008-10-25 10:06 |
| #3 Makes me all sad. |
| Posted by: g(r)omgoru 2008-10-25 10:05 |
| #2 Question is, will they really cut production? The pressure to cheat is enormous ... SOme of the countries don't have the ability to cheat, because although they might have more oil than Saudi Arabia their lifting and infrastructure costs are higher and they've been letting their infrastructure rot. |
| Posted by: Thing From Snowy Mountain 2008-10-25 09:49 |
| #1 if Chavez needs $97 bbl and Iran needs $91.. There will be cheating |
| Posted by: 3dc 2008-10-25 03:45 |