Split in OPEC appears as oil prices drop

[spuwho]

Saudia Arabia is trying to get Europe to sign long term supply contracts to offset a new competitor......USA.

Per WSJ:

Split between OPEC producers deepens as oil prices fall



A rift between OPEC members deepened over the weekend, as producers in the cartel moved in different directions amid falling oil prices.

Venezuela, which has been one of the most outspoken proponents of a production cut by the Organization of the Petroleum Exporting Countries, called over the weekend for an emergency meeting of the group to respond to falling prices. But Kuwait said Sunday that OPEC was unlikely to act to rein in output.

Saudi Arabia, meanwhile, appeared to expand on its recent move to defend its market share at the expense of other members by aggressively courting customers in Europe. Traders said Saudi Arabia is now asking for stronger commitments from some of its buyers in Europe, a move that would lock in those customers, including any new ones it would gain with recent price reductions.

Also on Sunday, Iraq's State Oil Marketing Company cut the price of Basrah Light crude in November for Asian and European buyers by 65 cents. That marks a discount of $3.15 a barrel below the Oman/Dubai benchmark for Asian customers and $5.40 below the Brent benchmark for European customers, according to official selling prices published by the company.

The moves and countermoves are the latest in a time of particular discord in OPEC. The organization was founded to leverage members' collective output to help influence global prices. In recent periods of low prices, Saudi Arabia — OPEC's top producer and de facto leader — has managed to cobble together some level of consensus.

But even modest cooperation between many members has broken down, and Saudi Arabia, in particular, has moved to act on its own. While it cut output earlier this summer, other members didn't go along. Since then, it has dropped its prices.

Late Friday, Venezuelan Foreign Minister Rafael Ramirez, who represents Caracas in the group, called for an urgent meeting to tackle falling prices. The group's next regular meeting is set for late next month.

[WarDamJagFan]

Don't forget Russia either. Their economy is heavily dependent on oil, and their maintenance level is around the $90 a barrel range. If it stays below that level for long, Putin will be going shirtless everywhere.

[spuwho]

Looks like Russia and US oil have about the same costs. The Saudi's want the prices to cool off to stifle the US boom.

Per Reuters:

Crude weakened on Monday, with U.S. oil closing at its lowest in nearly 2 years, as Kuwait said OPEC is unlikely to cut output to support prices and Saudi Arabia privately told oil markets that it is ready to accept oil prices perhaps down to $80 a barrel.

U.S. front-month November crude futures shed 8 cents to settle at $85.74, paring earlier steep losses but closing at its weakest since December 2012. Brent crude oil declined by more than 1 percent to under $89.

Kuwait's oil minister Ali al-Omair was quoted as saying by state news agency KUNA on Sunday that OPEC is unlikely to cut oil production in an effort to prop up prices because such a move would not necessarily be effective. Oil ministers from the Organization of the Petroleum Exporting Countries (OPEC) are scheduled to meet in Vienna on Nov. 27 to consider whether to adjust their output target of 30 million barrels per day (bpd) for early 2015.

Some OPEC members are clamoring for urgent production cuts to push global oil prices back up above $100 a barrel.

KUNA quoted Omair as saying $76-77 a barrel might be the level that would end the oil price slide, since that was the cost of oil production in the United States and Russia.

Top oil exporter Saudi Arabia is also quietly telling oil market participants that Riyadh is comfortable with markedly lower oil prices for an extended period, a sharp shift in policy that may be aimed at slowing the expansion of rival producers including those in the U.S. shale patch.

In private meetings with oil market investors and analysts Saudi official have telegraphed that the kingdom, OPEC's largest producer, is ready to accept oil prices below $90 per barrel, and perhaps down to $80, for as long as a year or two, according to people who have been briefed on the recent conversations.

In a monthly report issued on Friday, OPEC said Saudi Arabia reported September production of 9.704 million barrels per day (bpd), up from 9.597 million in August, adding to signs it has yet to respond to a drop in prices well below $100 a barrel by trimming output.

The lack of a Saudi cut could add to perceptions of traders and analysts that the kingdom is looking to defend market share, not prices.

[WarDamJagFan]

But in order for Russia to keep their economy moving, they need profits from those costs. This article from Yahoo Finance is stating Russia needs oil @ $100 per barrel to cover their basis. We recently had a meeting with a large US Oil Producer and they claimed $90 and up is a must for Russia.

http://finance.yahoo.com/news/saudi-arabias-oil-price-policy-101314302.html