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leistb
12-17-2008, 12:16 PM
Wednesday, December 17, 2008

OPEC Slashes Output By 4.2M Barrels a Day

The decision by the Organization of Petroleum Exporting Countries to massively cut production helped boost the price of crude oil Wednesday. The oil cartel announced it would cut production by 4.2 million barrels a day. That was significantly more than the 2-million-barrel cut oil analysts expected.

Commodity Markets

Crude oil for delivery in February jumped Thursday morning by 60 cents, or 1.03%, to $47.03 a barrel in New York. December crude futures, which are less liquid contracts because they will close next week, are down by 38 cents to $43.31 a barrel.

Analysts were expecting a cut of 2 million barrels a day largely stemming from pressure from the cartelís largest member Saudi Arabia.

However, because of the recent massive decline in the price of crude and the problems that may cause to the budgets of oil-rich nations, thereís been increasing pressure to cut even more. Venezuela, Iran and Russia had all lobbied for large cuts in production.

http://www.foxbusiness.com/story/markets/commodities/opec-likely-approve-m-barrel-oil-output-cut/

DReynolds
12-17-2008, 12:21 PM
OPEC Slashes Output By 4.2M Barrels a Day

HUGE MISTAKE. Short-term greed is making the Arabs raise the price of oil. But western economies (US, Europe,Japan) cannot handle an oil spike right now. It seriously risks sending the western world into a tailspin, which would of course hurt the Arabs as much as it hurts us.

Real dumb and short-sighted.

leistb
12-17-2008, 12:32 PM
HUGE MISTAKE. Short-term greed is making the Arabs raise the price of oil. But western economies (US, Europe,Japan) cannot handle an oil spike right now. It seriously risks sending the western world into a tailspin, which would of course hurt the Arabs as much as it hurts us.

Real dumb and short-sighted.

My impression was the oil producing nations fired the first salvo in the "protectionist" game. If speculation was somewhere around the 2 million a day mark and they essentially doubled it, that sends a pretty clear message on where they stand and how flexible they will be in any future negotiations around increasing capacity. Here we go...

DReynolds
12-17-2008, 12:39 PM
My impression was the oil producing nations fired the first salvo in the "protectionist" game. If speculation was somewhere around the 2 million a day mark and they essentially doubled it, that sends a pretty clear message on where they stand and how flexible they will be in any future negotiations around increasing capacity. Here we go...
Yes, but a seller of goods has to balance the desire for high prices with the possibility that he will bankrupt and destroy his customer base. In this case, the OPEC nations seem to be awfully glib about the possibility of causing a complete collapse of the Western world.

I seriously doubt the US economy can handle $80/barrel oil right now. It risks throwing millions of people into poverty.

leistb
12-17-2008, 12:47 PM
Yes, but a seller of goods has to balance the desire for high prices with the possibility that he will bankrupt and destroy his customer base. In this case, the OPEC nations seem to be awfully glib about the possibility of causing a complete collapse of the Western world.

I seriously doubt the US economy can handle $80/barrel oil right now. It risks throwing millions of people into poverty.

Agreed. But a longer-range view might suggest this could be the beginning of an econimic war and depending on their cash reserves, they may be willing to take that short-term risk in hopes of a much larger long-term gain.

penguinzee
12-17-2008, 01:01 PM
And OPEC was banking on $80 oil to break even next year... they're trying to save their own backs first, to hell with what the West thinks...

Agreed on all other points, this has the effect of kicking a dog when it's down, whether or not that was the intention...

Franc (penguinzee)

leistb
12-17-2008, 01:29 PM
When oil does return to somewhere near $80 a barrel and the prices are reflected at the pump that's going to even further curb consumer spending. What will Paulson/Bernanke's response be then? They're out of powder with regards to rates and there's no way to force anyone into spending in our present environment. When the final Christmas retail numbers emerge, whether higher or lower than expectations, they will be what they will be simply because the price of fuel fell off the map during the holiday season. Had fuel been what it was this summer those numbers would have been much worse!

Sysiphus
12-17-2008, 02:15 PM
This isn't going to bring oil prices anywhere near $80/bbl. In fact, all it will probably do is slow the decline in prices. OPEC has vastly underestimated the fall in demand. Oil is price elastic right now, so all this will do is lower revenues for the countries cutting back. Historically, that has resulted in cheating, which should drive down the price even more.

Renegade
12-17-2008, 02:52 PM
also, this morning's addition to this thread;

http://curevents.org/showthread.php?p=62333#post62333

BirdGuano
12-17-2008, 04:36 PM
Agreed. But a longer-range view might suggest this could be the beginning of an econimic war and depending on their cash reserves, they may be willing to take that short-term risk in hopes of a much larger long-term gain.

Law of Unintended Consequences applies.

Economic wars over energy usually lead to hot wars.. ie: Japan attacking Pearl Harbor because the US cut them off from oil in SE Asia prior to WW2.

While the Retail Sales numbers for Xmas may look ok, the Q1 PROFIT numbers will be horrible.

Fattail
12-17-2008, 05:28 PM
I pulled this off my broker's website:

OPEC announced cuts in its quotas from September levels of 4.2 mb/d. The announcement comes from the Iraqi oil minister and may have been intended to present some shock value. The cartel has already cut quotas by 2.0 mb/d thus creating a new reduction of 2.2 mb/d. That’s on the high side of market expectations going into the meeting, which created a small boost in oil prices.

The way they announced it smacks of desperation or worse manipulation. Get a little spike to sell off into.

Of course by the close, prices sold off a ton, right now the Jan contract is $40.29 down 3.31. THe IEA went on record saying they only expected 50% compliance with the quotas from OPEC.

Market reaction: Prove it.

Samen
12-17-2008, 05:36 PM
The cartel has already cut quotas...
And I thought cartels were ilegal :bob:

BirdGuano
12-17-2008, 06:06 PM
And I thought cartels were ilegal :bob:

Anti-trust is only a US thing....

Renegade
12-29-2008, 10:24 AM
Libya tells firms to cut output in line with OPEC

Mon Dec 29, 2008 12:05pm GMT

LONDON, Dec 29 (Reuters) - Libya has told oil companies to cut output by 270,000 barrels per day from Jan. 1, more than the reduction it needs to make under this month's OPEC deal to pump less, top oil official Shokri Ghanem said on Monday.

"Today we issued instructions to the oil companies working in Libya to cut production by 270,000 barrels per day from Jan. 1 in compliance with OPEC's resolution," Ghanem told Reuters by telephone.

(Reporting by Alex Lawler; editing by Christopher Johnson)
http://uk.reuters.com/article/oilRpt/idUKLT51995520081229