Saudi Arabia tells oil producers low prices becoming new normal

[Zippyjuan]

http://www.startribune.com/business/279008061.html

Saudi Arabia is quietly telling the oil market it would be comfortable with much lower oil prices for an extended period, a sharp shift in policy that may be aimed at slowing the expansion of rival producers including those in the U.S. shale patch.

Some OPEC members including Venezuela are clamoring for production cuts to push oil prices back up above $100 a barrel.

But Saudi officials have given a different message in meetings with investors and analysts: the kingdom, OPEC’s largest producer, will accept oil prices below $90 per barrel, and perhaps down to $80, for as long as a year or two, according to people who have been briefed on the recent conversations.

The discussions, some in New York over the past week, offer the clearest sign yet that the kingdom is setting aside its longstanding de facto aim of holding prices at around $100 a barrel for Brent crude in favor of retaining market share in years to come.

This has a lot of potential impacts. Lower energy prices is good for businesses- lower costs. It could mean changes for the fracking industry- which has greatly increased US productivity and global oil output. It can be a fairly costly way to produce oil and if there is a significant drop in prices, it may become economically unfeasable for some producers. It will also be important to countries like Iran, Iraq, Russia, and Mexico who rely heavily on income from energy to fund their governments. Marginal producers may be squeezed out by lower revenues.

Prices have fallen for several reasons. One, demand is slower. Europe and China economies are slowing. Production is up in US. Places they expected lower output from such as Iraq and the Ukraine situations have not led to declines in their outputs which were expected. Lower oil prices still have not shown up in gasoline prices so far.

[LibForestPaul]

Reason you state not of my concern.
How does this affect the dollar?
How does this affect US/China relationship?
How does this affect Europe/Russian relationship?
How does this affect Carbon trading scheme?

I sense this is one of TPTB bitches doing what they are told.

[juleswin]

Here comes the US lapdog trying to hurt Russia economy by drilling like crazy. You think they would pull this card when consumers were suffering but no way, they use only use it to try to hurt Russia. Hope the price drops lower and lower and their goal of hurting Russia fails.

$#@!ing $#@!s

[oyarde]

Oil could be @ $80 by the end of the week . Sign of economical slowing. Europe is flat as hell, no growth .

[Zippyjuan]

US economy has been growing slowly but we are still using less energy than we were back in 2004.

[ILUVRP]

i think oil should be about $20/ba , gas at $1.50/ga , screw the arabs and their high priced oil , all they do is support the bad guys .

cheap gasoline will put money a lot of money in the american consumers pockets .