Year in review 2014: Opec’s oil-price strategy anyone’s guess | The National

Year in review 2014: Opec’s oil-price strategy anyone’s guess | The National:



"The headlines at the end of November, following the meeting in Vienna of Opec’s oil ministers, were to varying degrees quite hysterical. There were declarations that it was “the end of Opec’s power” and much talk of crisis and disarray in the previously all-powerful oil cartel, which once held the world to ransom over the price of a barrel of oil. Also, there was triumphalism about the coming of energy independence for the United States based on shale oil and gas. The abundant new supplies in North America have become available because of new technology that enables companies to get the stuff out of previously impossible-to-reach rock formations.



There were myriad dissections and analysis about what Saudi Arabia, Opec’s de facto leader, was up to with its strategy to keep pumping oil at the same rates even though production is – and will continue to be into next year – at least a million barrels a day more than the world demands. Was it aiming to defend market share and to let prices slide even lower to force off the market some of those more expensive-to-produce supplies, especially US shale oil? Did Riyadh have some foreign policy aims in mind with its low-oil-price strategy, such as keeping pressure on Iran and, in support of its US ally, on Russia, both of which have been suffering from sanctions?



It is at times like this that some historical perspective is needed. Oil prices have indeed seen one of their most precipitous declines since last summer, when the price of world benchmark North Sea Brent crude was above US$115 (Dh422) a barrel. By early December, the decline was about 40 per cent, with Brent trading either side of $70."



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