OPEC Appeals Production Reduction for Recovering Oil Price
Saudi Arabia shows that it will adapt to lower oil price for a long time. Saudi government changing it policies sharply aims at slowing down competitors expanding, including American shale oil enterprises.
Some members of OPEC, including Venezuela appeal production reduction to promote oil price to rise to 100 dollars per barrel.
However, Saudi officials delivered different information, when they met investors and analysts. Saudi Arabia had already prepared for oil price lower than 90 dollars per barrel, even lower than 80 dollars. Saudi Arabia could endure for one or two years.
These speeches are the clearest signals so far. Saudi Arabia abandoned the policy that maintained Brent oil at a price of near 100 dollars and accepted lower price. The measure is to maintain market shares for years to come.
Insiders disclose that Saudi seems to bet on lower price which may cause fiscal tightening in some members of OPEC. It is a necessary measure to acquire more profits in mid-term. Through depressing price, Saudi can restrict new investments and restrain market supply of American shale oil or deep-sea oil to grow further.
The speech of Saudi officials did not refer to the information whether Saudi agreed production reduction or the quantity of production reduction. Previously, many analysts predicted that Saudi reducing production could support global oil market. Nowadays, oil production has already exceeded consumption substantially. Oil production
of Saudi Arabia accounts for one third of production of OPEC, about 9.7 million barrels per day.