The Opec cartel is to continue flooding the world with crude oil despite a chronic glut and the desperate plight of its own members, demanding that Russia, Kazakhstan and other producers join forces before there can be output cuts.
Brent prices tumbled almost $2 a barrel to $42.90 as traders tried to make sense of the fractious Opec gathering in Vienna, which ended with no production target and no guidance on policy. It reeked of paralysis.
Prices are poised to test lows last seen at the depths of the financial crisis in early 2009. The shares of oil companies plummeted in London, and US shale drillers went into freefall on Wall Street.
Opec leaders will now have to grit their teeth and prepare for a long siege, testing their social welfare models to the point of destruction. Even Saudi Arabia is pushing through drastic austerity measures.
Deutsche Bank said the fiscal break-even cost needed to balance the budget is roughly $120 for Bahrain, $100 for Saudi Arabia, $90 for Nigeria and Venezuela, and $80 for Russia, based on current exchange rate effects.
Bhushan Bahree, from HIS Energy, says there is no longer anything to distinguish Opec members from any other producer. The cartel is defunct. “Opec and non-Opec are irrelevant classifications,” he said.
Not many will mourn the passing of the price-fixing cartel OPEC. OPEC (Organization of the Petroleum Exporting Countries) is made up of some of the nastiest regimes on the planet. Their current members include Algeria, Angola, Equador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.
In fighting among the Arab nations will grow as oil revenue falls and undermines their economies. The problem for the rest of the world is no longer oil supply, it is instability in the middle-east and the export of terrorism.
Meanwhile world leaders and UN Agenda 21 Greenies who love cycling and Muslims worry about the weather. It’s a very strange world.