After dissenting opponents within OPEC argued about the current price of oil and current production levels, the oil cartel agreed today to leave the production ceiling at 30 million barrels per day. Saudi Arabia, which produces the most oil, had proposed increasing oil production earlier this week to make up for Iranian sanctions that will kick later this year, but changed course and today announced the current level will suffice.
The timing of OPEC's meeting was premature, as it commenced before political events that could apply heavy pressure on the price of international crude. The next few weeks will create a clearer picture of how the eurozone will attempt to correct its troubling economic problems, with the Greek elections taking place this weekend, followed by the European Council meeting at the end of June.
With the Spanish debt market drying up and sovereign debt levels rising to record levels, oil could face a precipitous drop in the near term. A recent report for Credit Suisse estimates a worst-case scenario of $50 per barrel of crude. With the likelihood of increased price volatility and potential for massive price pressure in the near future, OPEC announced plans of reconvening if Brent oil prices drop below $90.
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With OPEC keeping production levels the same, and promises to cut supply if economic issues continue to lower oil prices, Brent benchmark prices forged a slight rally, gaining 1.05% so far today.
Big oil is staying in line with the broad markets. Chevron (NYS: CVX) , which relies on international assets to create more than 65% of its revenue, is up 0.86%. Royal Dutch Shell (NYS: RDS.B) is up 0.9%. The company announced it is buying back 480,000 class B shares for cancellation.
Another high performer today is JA Solar (NAS: JASO) . The company announced it will start repurchasing $100 million shares before the end of September, which would amount to roughly half its current value. The company also announced moving parts of its operation outside of China to combat anti-dumping tariffs.
The price of Henry Hub natural gas increased sharply today to the benefit of Sandridge Energy (NYS: SD) ; the natural gas producer has gained 4.1% so far today. Also jumping today is (NYS: APA) . The oil and gas producer released new estimates of its recently acquired liquids-rich portfolio showing the company has substantial reserves ready to drill.
After OPEC's meeting today, crude supply will remain unchanged, meaning all eyes are now on Greece. The election will determine the pace of eurozone quandary. With increased instability expected in the market, now is a great time to check out the Motley Fool's special report: "3 Stocks That Will Help You Retire Rich." This free report will list three remarkable companies as well as offer great advice on how to invest to secure a comfortable retirement. Get your free report now.
At the time thisarticle was published Joel South owns no shares of the companies listed above. Motley Fool newsletter services have recommended buying shares of Chevron. The Motley Fool has a disclosure policy.
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