OPEC by default

By ANTHONY HALL, United Press International   |   June 9, 2011 at 8:45 AM   |   0 comments

| License Photo
The world's largest oil cartel ended a meeting in Vienna Thursday with no agreement to raise production, and some signs of members breaking ranks.

Saudi Arabia, specifically, said it may raise production despite members of the Organization of Petroleum Exporting Countries cartel failing to agree to do so. OPEC sets production quotas for its members as a direct group effort to balance -- read manipulate -- oil prices.

With no agreement, OPEC by default will keep production quotas unchanged.

Saudi Arabia is the biggest producer, by far, in the group that includes Kuwait, Iran, Venezuela, Algeria, Libya, Iraq and five other countries. Moreover, Saudi Arabia has by far the most under-utilized capacity with up to 3 million barrels of oil a day it could pump relatively quickly, The New York Times reported.

In effect, "It's all about how much extra oil Saudi Arabia can or is willing to put on the market. Who cares what Iran says? It doesn't matter," Amy Myers Jaffe, an energy industry analyst at Rice University, told the Times.

The OPEC decision -- or lack of one -- came a day after U.S. Federal Reserve Chairman Ben Bernanke acknowledged commodity prices were giving consumers pause.

"The rise in commodity prices has directly increased the rate of inflation while also adversely affecting consumer confidence and consumer spending," Bernanke said in a speech in Atlanta.

He also said, "As the United States is a major oil importer, any geopolitical or other shock that increases the global price of oil will worsen our trade balance and economic outlook, which tends to depress the dollar."

That implies the tail is wagging the dog. It is expected that currency fluctuations influence the price of oil. Less well known is that the price of oil -- as demand for oil is bankable and on the rise -- affects currency values, as well.

Essentially, if Saudi Arabia pumps more oil on the sly, the dollar should rise.

In international markets Thursday, the Nikkei 225 index in Japan rose 0.19 percent, while the Shanghai composite index in China lost 1.71 percent. The Hang Seng index in Hong Kong lost 0.23 percent, while the Sensex in India lost 0.05 percent.

The S&P/ASX 200 in Australia rose 0.28 percent.

In midday trading in Europe, the FTSE 100 index in Britain was flat, up less than 0.01 percent, while the DAX 30 in Germany added 0.2 percent. The CAC 40 in France rose 0.09 percent, while the Stoxx Europe 600 rose 0.05 percent.

© 2011 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
Trending News
Join the conversation
x
Feedback