Oil

Oil: Crude oil fell further, over 2% yesterday, below US$75/bbl, on news that meetings among Saudi Arabia, Venezuela, Mexico and Russia oil ministers failed to yield any production cut meetings. An AFP article reports that for tomorrow’s OPEC meeting, it is largely expected that Saudi Arabia, the cartel’s largest crude producer, will not cut production to maintain its market share. Market-watchers were quoted that the Saudis will be incentivized to maintain production volume, given: 1) As oil prices move towards the US$70 range, the prime loser will be shale players as prices dip below their marginal cost, shoving them out of the market. This will shave excess supply, and help moderate prices. 2) The Saudis are in a stronger financial position relative to less friendly oil producers, such as Iran which would come under pressure as prices fall. Again, this would bode well for the kingdom in the long run.