The two main engines of oil prices were increasing production in the United States with the use of oil shale technology, and a decrease in demand for energy as global growth slows. geopolitical unrest has taken a back seat to those two factors. Even rising violence in the oil-producing countries has not deeply affected the price of crude.
The Organization of Petroleum Exporting Countries (OPEC) will hold its general meeting this week to decide whether to reduce its oil production quota to reverse the decline in crude prices.
during the last OPEC meeting in June, the members considered as the market to provide adequately, and they said geopolitical tensions were the main reason the price had changed. There was a comment on the statement by stressing that although global demand would be stronger in 2014 than in 2013, non-OPEC supply increased.
What is OPEC's mandate?
OPEC is an international organization and economic agreement with the mission to coordinate the policies of the oil producing member countries. Its objective is to ensure a stable income to Member States in coordinating oil production decisions.
OPEC countries account for approximately 40% of the world's oil supply, and with so much control over the supply of oil, changes in production levels can have a significant impact on oil prices.
OPEC is an intergovernmental organization that was created at the Baghdad Conference in September 1960 by Iraq, Kuwait, Iran, Saudi Arabia and Venezuela. Current membership includes: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela
OPEC between a rock and a hard place Shale
There is speculation growing over the recent decision of the entity to reduce oil production to boost the price of oil. At the time of the last meeting, the price of oil was well above $ 100 US mark. This time, he crossed the $ 80 price line, and it continues to dip lower than the two main factors described above. All major groups of economic thinking and research agencies have downgraded global growth reduces the expected demand for energy. The boom in shale exploration has reduced dependence on foreign oil for America. Commodities across the board suffer from oversupply is greater than demand.
OPEC has a difficult choice to make the cut in production can affect the prices up, but it could also mean that non-OPEC members, such as Russia, the US and the UK will increase their market share if they keep selling crude at discount prices.
winners and losers
Big energy importers have benefited from current prices. Asian economies in particular have been able to store cheaper oil and reduce imports. India and Japan have reduced their deficits, while their exports did not increase as much as expected due to lower imports. China has accelerated the purchase of oil, which could correspond to $ 20 billion a year in savings.
worldwide Consumers also benefited oil prices in economies where the price of crude is directly correlated with gasoline. Air travel, however, was not affected as airlines have mostly not passed on savings.
Meanwhile, the oil producing countries are struggling to cope with the continued decline in crude prices. energy giants that are part of OPEC, and foreigners such as Russia that depend on these revenues as much of its economy, were hit by a drop of more than 30% of the price. It is unclear at this stage how many US and Canadian industries have been affected as shale and fracking are a viable option with high prices, but less than cheap, easier to procure the oil is abundant.
has Divided OPEC could send a signal Shale
Saudi Arabia has held talks with the energy ministers of member countries of OPEC and States not members ahead of the crucial meeting Thursday in Vienna. The market expects a drop in production as seen by the various oil experts surveys. Saudi officials rejected the need for a cut. The United Arab Emirates and Iran have suggested they will support the decision of OPEC's largest oil producer. Saudi Arabia and Russia reported production cuts unlikely and it appears to be no cooperation between Russia and OPEC. The shale rise has been minimized by the Saudi Oil Minister Ali al-Naimi, who believes that although it is a great innovation, the production figures are inflated by the American media.
Meanwhile, Iraq and Venezuela are the biggest supporters of the reduction of oil production. Given the weight of the Saudis in OPEC and the lack of emergency countries about the benefits of oil, Saudi Arabia can afford to maintain current production levels, and wait to see how the industry US shale manages lower profits that were probably not intended by investors in technology.
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