In the face of the worst worldwide financial crisis since the Great Depression, OPEC is expected to cut crude-oil output and raise prices at an emergency meeting in Vienna Friday. But even with crude oil prices down more than 50% from their July record highs, friction between cartel members has analysts wondering just how big the prospective cut will actually be.
Oil prices continued their downward slide Wednesday, dropping $5.22 a barrel, or 7.2%, to $66.96. Prices are down about 55% from the record high of $147.27 a barrel reached July 11. Crude’s dramatic plunge now has OPEC members scrambling to cut production and at least stabilize prices. The cartel members all agree that the outlook for demand has declined significantly. But there is a considerable amount of discord over the size of that cut.
OPEC members called for the emergency meeting – the cartel had originally been set to meeting Nov. 18 – so it might settle any of the production disputes between cartel members, even as it prepares for a global recession.
That will be easier said than done. Different OPEC countries have different economic models – with different oil-pricing floors – to keep their trade balances in check. PFC Energy estimates that Qatar...only needs oil to trade at $10 a barrel to keep its trade balance...
At the other end of the spectrum, however, are Iran and Venezuela, which rely heavily on petrodollars to finance social programs and infrastructure development, meaning they need crude oil to trade at $100 a barrel or better. Little wonder those two countries have been the most vocal proponents of a large cut in production.
However, OPEC’s most productive and influential member, Saudi Arabia, has based its budget on an average oil price of $50 a barrel...
Oil prices continued their downward slide Wednesday, dropping $5.22 a barrel, or 7.2%, to $66.96. Prices are down about 55% from the record high of $147.27 a barrel reached July 11. Crude’s dramatic plunge now has OPEC members scrambling to cut production and at least stabilize prices. The cartel members all agree that the outlook for demand has declined significantly. But there is a considerable amount of discord over the size of that cut.
OPEC members called for the emergency meeting – the cartel had originally been set to meeting Nov. 18 – so it might settle any of the production disputes between cartel members, even as it prepares for a global recession.
That will be easier said than done. Different OPEC countries have different economic models – with different oil-pricing floors – to keep their trade balances in check. PFC Energy estimates that Qatar...only needs oil to trade at $10 a barrel to keep its trade balance...
At the other end of the spectrum, however, are Iran and Venezuela, which rely heavily on petrodollars to finance social programs and infrastructure development, meaning they need crude oil to trade at $100 a barrel or better. Little wonder those two countries have been the most vocal proponents of a large cut in production.
However, OPEC’s most productive and influential member, Saudi Arabia, has based its budget on an average oil price of $50 a barrel...
