Saudi Arabia gives oil price thumbs up
OPEC might as well have just one member. Saudi Arabia is the largest crude producer in the cartel. If it does not go along with an increase or cut in production, a decision by the rest of the members won't mean much.
The Saudi oil minister telegraphed OPEC's intentions Tuesday by saying his country was happy with the current price of crude. Ali al-Naimi told Bloomberg, "The price is good for everybody, consumers, producers."
The official OPEC meeting does not start until September 9, so the Saudi comments are important. There has been some concern that OPEC would tighten supply to move crude up. A number of cartel members have expressed concern that oil prices below $60 make it difficult for their nations to support national budgets.
One of the theories about OPEC's decision, perhaps the most compelling one, is that the cartel does not want rising oil prices to cut off the momentum of the global recovery. If crude were to move back to where it traded in July a year ago, over $141, the world could be driven into another recession. OPEC does not want to risk sending its major customers back into another deep economic downturn.
The other reason OPEC may not be anxious to tighten supply is that it would give other oil-producing nations like Russia and Canada the chance to pick up a larger share of global oil sales. If OPEC wants to stay relevant, it has to be viewed as the group that sets the market.
Douglas A. McIntyre is an editor at 24/7 Wall St.