Editorial: OPEC Gold Glinting In The Oily Darkness
"The rich man plans for tomorrow, the poor man for today." Chinese proverb
Last week, the Organisation of the Petroleum Exporting Countries (OPEC) met in Vienna and, as predicted, agreed to continue with current rates of oil production rather than curtailing output. As a result, Brent crude slipped to $67 per barrel - its lowest level in five years - and West Texas Intermediate (WTI) lost more than 12 per cent of its value.
Russian pressure seems to have missed the key chakra points in OPEC’s subtle body, and, as bargaining fell on deaf ears, the rouble crashed on the currency markets against the dollar to its lowest point in history.
The recrudescence of 1998’s "Rouble Crisis" will be foremost in the collective memory of the Russian commonwealth, a fiscal crunch that resulted in the nation defaulting on domestic debt and declaring a moratorium on payment to foreign creditors.
In the wake of the rouble’s Dantean descent, a Russia highly exposed to the peaks and troughs of the commodity cycle has slipped out of the world’s top ten economies to a sub two trillion dollar GDP level, on par with the likes of Canada, Spain and Australia.
Every oil-dependent currency – from the Malaysian ringgit to the Mexican peso - has been hit by prices 40 per cent lower than in H1 2014, even to the extent that only two of OPEC’s twelve members - the United Arab Emirates and Qatar - can profitably produce oil at prices below $70 per barrel.
The more economically-bereft members of this combine stand on the threshold of bankruptcy. OPEC has often been called the Gulf Cooperation Council (GCC) +6, this has never been more evident.
As China’s economy slows, Japan enters its fourth recession in six years and the Eurozone continues a 16-month patch of economic stagnation, the beginning of 2015 is looking ominously tenebrous. Yet a rich man’s gold still glints in the dark….
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