Remember when OPEC was a cartel that attempted to stabilise oil prices by manipulating its production?
Saudi Arabian Minister of Petroleum Ali Al-Naimi made a surprising statement at a UN climate-change meeting in Lima, Peru.
“Why should I cut production? You know what a market does for any commodity. It goes up and down and up and down,” Al-Naimi said according to Bloomberg.
This is interesting, because Al-Naimi is ostensibly the most powerful man in the cartel that has been manipulating the global oil market since 1960.
This comment came on the same day that OPEC lowered its demand expectations for next year to 28.9 million barrels a day, a cut of about 300,000 barrels. It’s the lowest the forecast has been since 2002.
OPEC gave two reasons: The first is increased production around the world (mostly coming from shale production in North America). The second is reduced demand. As technology is improving for oil extraction, it’s doing the same for energy efficiency.
The price of oil hit new lows this morning. Here’s the chart for WTI crude:
Saudi Arabia’s tactics are working, too. The US Energy Information Administration (EIA) recently reduced its forecast for production growth in 2015 by 100,000 barrels a day.