Editorial: OPEC, Oversupply And The Coming Oil War?
"Bad news isn't wine. It doesn't improve with age." Colin Powell (1937 - )
As Hellfire anti-tank missiles and rapid-fire cannon rounds pound the Islamic State, a seemingly counterintuitive plunge in the price of oil has rocked the world markets. even though explosions ring their hollow knell in the deserts of Iraq and Syria, the usual price hike that civil strife in theMiddle East incurs has been inverted. After reaching a high of $115 a barrel in June, Brent crude has nosedived by almost 20 per cent to its lowest level since 2012.
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Despite global military action unfolding across the Fertile Crescent of the Mashriq, oil supply and output in Iraq - the world’s seventh largest oil producing nation - have remained untroubled. A host of other non-bellicose forces have colluded to force the going rate of the black gold ever lower.
This current depreciation in oil is dangerous because contributing factors are found on both the supply and demand side. The booming shale oil industry in the USA and resurgent crude production in Libya have led to a global oversupply. Disappointing financial data coming out of the People's Republic of China and a prohibitively strong dollar have, likewise, entrained a lag in demand. Then add to the mix, the Organization of the Petroleum Exporting Countries,OPEC.
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Next month, the oil cartel will meet to discuss their direction in the current climate. And they will meet as a house divided. An Iran-fronted faction will propose immediate cuts in production to re-float crude to the $100 per barrel mark. It is mooted that a separate element, led by Saudi Arabia and backed by the hereditary monarchies of the Gulf, will not oppose a deleterious price drop in order to maintain their share of the market.
In the case of an oil price war, those responsible for the more costly global oil and gas projects, from the Pre-Salt of Brazil to HPHT wells in the North Sea and frack pads in West Texas are holding their breath and hoping that the worst does not come to the worst. The sound of corks popping has gone suddenly silent....
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