DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate - View Single Post - Saudis cut oil output by 1 million barrels a day to raise prices

**beethyday** · 01-31-2007, 04:55 AM

Doesn't look like y'all read the same article I did.

The Saudi's have already cut production by 842,000 barrels during a time in which the price of oil skidded from $70+ to $56.59 (today). They are cutting 158,000 more, which they hope will keep the price above $55.

The overall drop is from 27.5 to 25.8, or 1.8 million barrels. We know from this article that SA will account for over 1 million of these cuts, say 1.2 million barrels. Since SA accounts for 32.9% of OPEC production, how long will they remain happy with a production agreement where they bear the brunt of 55-67% of the cost?

Regardless, they most likely won't want to cut any more of their revenues.

They like their role as swing producer, but I think it's more perception nowadays than reality. Uncertainty is what rules these oil markets, not Saudi Arabia, and that's what will keep the spot price above $55.

However, if the next inventory report has oil inventories jumping again like they did last time, the Saudi's will be hard pressed to keep the short-term price above $55 unless they decide to turn off the spigots (which would be ultimately self-defeating).

01-31-2007, 04:55 AM	#14
beethyday Join Date Oct 2005 Posts 497 Senior Member	Doesn't look like y'all read the same article I did. The Saudi's have already cut production by 842,000 barrels during a time in which the price of oil skidded from $70+ to $56.59 (today). They are cutting 158,000 more, which they hope will keep the price above $55. The overall drop is from 27.5 to 25.8, or 1.8 million barrels. We know from this article that SA will account for over 1 million of these cuts, say 1.2 million barrels. Since SA accounts for 32.9% of OPEC production, how long will they remain happy with a production agreement where they bear the brunt of 55-67% of the cost? Regardless, they most likely won't want to cut any more of their revenues. They like their role as swing producer, but I think it's more perception nowadays than reality. Uncertainty is what rules these oil markets, not Saudi Arabia, and that's what will keep the spot price above $55. However, if the next inventory report has oil inventories jumping again like they did last time, the Saudi's will be hard pressed to keep the short-term price above $55 unless they decide to turn off the spigots (which would be ultimately self-defeating).
	Quote