Wednesday, November 19, 2014

Oil Slides Toward $78 Per Barrel

Reuters reports that "Brent crude oil slipped towards $78 a barrel on Wednesday as data showed Saudi Arabia increased crude exports in September despite signs of an oversupplied market and producers appeared divided ahead of an OPEC meeting to discuss output."

The big question is why? The reduction in price hurts other OPEC nations because their government operating budgets depend on oil revenue. Yet, according to the article, Saudi Arabia does not seem inclined to reduce production, and is prepared to live off its cash reserves if need be.

The answer seems to me to be pointedly clear. Saudi Arabia is trying to kill off the fracking industry in the U.S. Losing U.S. dependence on Saudi oil is an existential risk to the Saudi Arabia. Not only does Saudi Arabia face reduced revenue, but the United States would be freer to operate (or not operate) in the Middle-East, pursuing policies that might not favor Saudi Arabia.

No comments:

Post a Comment