On November 27, the nation’s attention will descend on the heart of Texas for another classic NFL Thanksgiving matchup between the Dallas Cowboys and Philadelphia Eagles. Cheap seats on StubHub are currently selling for $150 and up.
Also on Thanksgiving Day, but on the other side of the world, the oil industry’s attention will descend on Vienna, Italy, for the latest meeting between members of the Organization of Petroleum Exporting Countries. Tickets are not available, but if they were, they would be well worth the price of admission.
The price of Brent crude closed at a four-year low—$78.17—on November 13, adding fuel to what is expected to be a very tense meeting between OPEC members at the end of the month. The group has typically convened to determine oil prices, which generally sets the global price. The Saudis have gone against the conventional method recently, leaving fellow members up in arms over lower prices that generate little or no profit. Some members have suggested cutting output in order to maintain price, but the Saudis have been very “Greenspan-like, in terms of clarity,” said Mike Wittner, head of global oil andcommodities research at Societe Generale.
In the meantime, Saudi Arabia (who contributes roughly 33% of all OPEC production) has denied accusations of a price war with the U.S. shale producers, despite implementing price cuts of more than $25 since the beginning of October. “Talk of a price war is a sign of misunderstanding, deliberate or otherwise, and has no basis in reality,” insisted Ali al-Naimi, Saudi Arabia’s oil minister, while speaking in Mexico this week.
“I don’t see Saudi Arabia using oil as a geopolitical weapon, but they are testing U.S. shale,” said Jeremy Friesen, Executive Director of Morgan Stanley, in a presentation on Tuesday in Denver.
“Even without immediate OPEC cuts, global demand should respond to the large price discount and help absorb current supply,” Friesen said.
EIA takes out the Knife as WTI breaks the $75 Floor
The Energy Information Administration reflected the slumping oil prices in the latest installment of its Short Term Energy Outlook, slashing its price prediction for Brent in 2015 to $83.42 from $101.67. WTI prices in 2015 are estimated at $77.75, down from its original assessment of $94.58. Both estimates are approximately 18% less than its previous prediction.
West Texas Intermediate prices closed today below $75 – the lowest mark in three years. The prices came in spite of a draw of roughly 1.7 million barrels in the Department of Energy’s latest petroleum inventory report.
“To me, the market’s reaction confirms just how bearish sentiment is. Even with decent numbers like these, the market can’t rally,” Kyle Cooper, managing director IAF Advisors, said in a Reuters interview.
Barron’s said $75 oil prices were plausible back in March due to the unfixed production costs. The article says most tight oil is still economic at $75 a barrel, but several E&Ps have announced slight reductions in their 2015 drilling plans in the recent earnings season. The Wall Street Journal doesn’t expect changes from OPEC until Brent prices reach $70 per barrel. That’s $8.17 away, just enough for a cold beer at the Thanksgiving Day game.
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