Saudi Arabia carries the big lumber at OPEC meetings. It is the largest oil producer in the cartel. Its government is one of the most stable, especially when contrasted to nations such as Venezuela.
At the current meeting of OPEC members Saudi Arabia’s Oil Minister Ali al- Naimi said the crude market is “well balanced” and inventories are in a “healthy position,” according to a report from Bloomberg.
OPEC is going to keep supplies where they are. It is a calculated gamble that prices will go higher without producing nations taking the blame.
OPEC has every reason to believe that events will continue to fill its bank accounts.
Russian tensions with the West are still growing. Venezuela is encouraging Putin & Co. to conduct joint naval maneuvers. Those would go one only a few hundred miles south of the US territorial waters. Russia in not beyond using crude as a tool to vex economies in the US and EU. Neither is the Chavez regime in Venezuela
The Farmer’s Almanac says that this will be an especially cold winter.It may not be a reliable gauge, but a chilly period across the Northern Hemisphere will almost certainly suck down reserves.
Hurricane Ike looks like it may disrupt production in the Gulf of Mexico. If it does not, the storm season is not over. If more tropical depressions are thrown at that fairly small area with so many refineries and drilling platforms, one of them could hit the bull’s eye.
Perhaps the most important element of the oil consumption puzzle is that there is no concrete evidence that China and India have curtailed their thirst. While the average US citizen may be riding a bicycle, China still needs tens of thousand of trucks to move export goods from the central part of the country to ports.
OPEC can do nothing, look good, and still profit. Clean hands and a clear conscience.
Douglas A. McIntyre
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