Is glut the only factor pulling oil prices down?

By FXStreet FXStreet (Mumbai) – According to the International Energy Agency, the oil price plunge since June 2014 has reduced OPEC revenue by nearly $500 billion a year. The market share strategy championed by Saudi Arabia was announced by OPEC in November 2014. Oil rich Saudi Arabia with the objective of pushing American shale oil producers out of the market, abandoned its policy of reducing supplies to stabilize price. The OPEC at the behest of Saudi Arabia and few other rich oil producing nations decided to increase production to defend market share rather then cut output to prop up prices. The resulting glut played havoc on the oil price.

The collapse in oil prices that led to reduction in OPEC’s revenue has hurt less affluent OPEC members like Algeria, Angola, Ecuador, Nigeria and Venezuela. Venezuela’s oil minister has warned that oil price could touch as low as $25 if OPEC does not stop pumping. Ecuador’s oil minister reiterated that the only way to strike a balance is to cut production.

OPEC members are gathering in Vienna on December 4 to decide on output. OPEC is unlikely to decide on cutting output at the meeting if the non-OPEC members refuse to tread similar line. …read more

Source:: FX Street