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Old 01-31-2007, 09:40 AM   #15
Seiblybiozy

Join Date
Oct 2005
Posts
587
Senior Member
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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).
I wanted to hear more Bush rants, and you ruined it.

Seiblybiozy is offline


 

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