Saudi Arabia showing no signs of cutting oil production despite falling prices
As oil prices continue to tumble, Saudi Arabia is the only nation to be keeping its head while all around it other major producers seem to be losing theirs.
As prices crashed to the lowest levels in four years, the kingdom pumped 9.6 million barrels a day (b/d) of oil in October and has made no indication that it intends to drastically cut production anytime soon.
This was followed by remarks made in early November by Saudi Arabias Oil Minister Ali al-Naimi, which bewildered his peers in the oil industry, that despite the free-falling oil prices and the kingdom making no effort to cut production, Riyadh was not seeking a price war, but instead wanted a stable oil market.
As of mid-November, Brent crude is trading at just under $80 a barrel and many analysts are now saying prices in 2015 could be much worse. Some even say $50 a barrel is a more realistic figure than $100 a barrel if Saudi Arabia is serious about wanting to nullify the threat of unconventional oil production from the US.
The scene is now set for what is expected to a fraught Opec meeting when the 12-member oil producers group meets in Vienna on 27 November to discuss production levels and how best to shore up oil prices.
There is a definite feeling from some Opec members, such as Iran and Venezuela, that production cuts are essential to arrest the decline of the oil price and try to push it back to as close to $100 a barrel as possible. However, unilateral cuts appear unlikely as international sanctions against Iran are ongoing and countries, such as Libya and Iraq, are looking to maintain or even ramp up production to rebuild their respective post-war economies.
This means many Opec members expect Saudi Arabia to shoulder the burden of most agreed cuts. However, Riyadh has made it extremely clear that this will not happen and will only agree to production cuts if an effort is made by all members to curb output.
What the exact outcome of the meeting will bring is unknown, but it is clear Opec is becoming more fractious. Members are now looking to shore up their own markets and ensure their key clients long-term energy needs are prioritised over short-term price fluctuations.
Riyadh will not have not forgotten the disastrous Opec meeting in June 2011, where it pushed for increased production to arrest the sharp increase in the oil price only to be outmanoeuvred by Iran and Venezuela.
Iran and Venezuela need higher oil prices to balance their respective budgets much more than Saudi Arabia. Riyadh also knows that the longer it keeps output high, the more bargaining power it will have on 27 November.