This week’s OPEC meeting is the most important in years

The Washington Post ^ | November 25,2014 | Steven Mufson

[Hojczyk]

For most of the past four years, OPEC has had an easy time.

The Organization of the Petroleum Exporting Countries hasn’t had to do much to keep oil prices over $100 a barrel. Disruptions in supply — most notably the Libyan civil war — and rising demand have kept the cartel’s coffers full. It has been, say Barclays’ commodities analysts, the culmination of OPEC’s “golden age.”

Saudi Arabia, which has played the role of swing producer balancing the market, has not trimmed its output as it often has in the past, instead cutting prices to hang onto market share while waiting for other countries to volunteer to share the burden. Meanwhile prices have continued to slide to about $75 a barrel for the U.S. benchmark grade of West Texas Intermediate.

“The reality of the shale revolution in the U.S., long scoffed at from within OPEC as high-cost folly, is now hitting the producer group where it hurts, while oil demand growth has underperformed significantly,” Citigroup commodities analysts said in a note to investors Monday. Over the past four years worldwide, oil companies have invested $2.5 trillion to bring new supplies online, according to Leonardo Magueri, an associate on the geopolitics of energy at the Harvard Kennedy School’s Belfer Center for Science and International Affairs.

[Sequoyah101]

No OPEC meeting since the 70s has resulted in one self-correcting action. I can’t recall one time since the 70s that OPEC successfully acted unilaterally for their own benefit. Every swing of importance has been made by the Saudis acting alone.

I expect oil prices to continue to fall.

[big bad easter bunny]

Not only has the price dropped substantially, the profit margins has dropped even more the closer to production costs get. Russia, Venezuela and Mexico which together produce a hell of a lot of oil (Mexico just going public recently) can’t afford to sell one less barrel, making it hard for OPEC to create a strangle hold, plus if America ends the ban on selling oil, it will be more affordable to receive shipments for some countries due to proximity, creating more downward pressure.

[familyop]

Looks like OPEC has been calling the big bluff so far. Are the more technical plays going to be steeped in debt? We might see the unexpected answer within the next few quarters.