This is the best news I have read in a long time. Without the Saudis, OPEC is broken. The Saudi’s are smart enough to know that OPEC is trying to kill the Goose that laid the golden egg! Maybe they are getting nervous about America drilling for its own oil and ending our dependence on foreign supplies.
This should drive oil prices down even further. Now we can pick and choose whom we get our oil from and we can even restrict oil purchase from certain rogue countries. What was once a Monopoly could turn to competitive pricing. This will be interesting to watch.
Saudi Arabia walked out on OPEC yesterday, saying it would not honor the cartel’s production cut. It was tired of rants from Hugo Chavez of Venezuela and the well-dressed oil minister from Iran.
As the world’s largest crude exporter, the kingdom in the desert took its ball and went home.
As the Saudis left the building, the message was shockingly clear. “Saudi Arabia will meet the market’s demand,” a senior OPEC delegate told the New York Times. “We will see what the market requires and we will not leave a customer without oil.”
OPEC will still have lavish meetings and a nifty headquarters in Vienna, Austria, but the Saudis have made certain the the organization has lost its teeth. Even though the cartel argued that the sudden drop in crude was due to “oversupply”, OPEC’s most powerful member knows that the drop may only be temporary. Cold weather later this year could put pressure on prices. So could a decision by Russia that it wants to “punish” the US and EU for a time. That political battle is only at its beginning.
The downward pressure on oil got a second hand. Brazil has confirmed another huge oil deposit to add to one it discovered off-shore earlier this year. The first field uncovered by Petrobras has the promise of being one of the largest in the world. The breadth of that deposit has now expanded.
OPEC needs the Saudis to have any credibility in terms of pricing, supply, and the ongoing success of its bully pulpit. By failing to keep its most critical member, it forfeits its leverage.
OPEC has made no announcement about any possibility of dissolving, but the process is already over.
