Saudi Arabia will not curtail...

Saudi Arabia  sends yet another stern warning to suppliers that it would not curtail production:
(http://money.cnn.com/2014/12/22/news/economy/saudi-arabia-oil-production/index.html?sr=twmoney122314saudi1230story)

This bit of news is in In keeping with expectations, and oil prices should fall further, hurting wounded  Russia, Venezuela and Iran...

Good news for growth elsewhere. Depressing for GCC stock markets, real estate and expatriates and nationals; and for all oil producers...

In an oligopoly, if one cuts prices, others have to or they will lose market share. This is Baumol's Kinked Demand Curve.

A Requiem for OPEC? OIl at $ 40?

As was submitted here , oil continues to retreat in run. UAE has said that it would not care less if it falls to $ 40.
http://www.bloomberg.com/news/2014-12-14/u-a-e-says-opec-won-t-change-output-even-if-price-drops-to-40.html

That seems to be talking it down... quite effectively. The $150 billion of value loss on Gulf capital markets  since the end of October ...
Reuters: http://in.reuters.com/article/2014/12/14/us-opec-oil-badri-idINKBN0JS06F20141214.

That does not seem to have bothered not so much. 

Markets like Oman will fall faster than others as they have nowhere the reserve staying power of the Saudis.  Reserves cannot be used in the short run and capital markets are in the short run. 

Is this aimed at Iran in a joint Saudi- UAE effort? There goes the dysfunctional  cartel of OPEC then.


This brings power shift in the Middle East back  to Saudi Arabia and GCC rather than Iran .

Sell and buy oil? It seems cruising towards$ 50 for now and now that UAE has set it at $ 40!!!

The insignificance of being OPEC...

OPEC's key official, addressing a news conference  in Dubai, stated that oil price fall was not in keeping with the fundamentals.   (http://in.reuters.com/article/2014/12/14/us-opec-oil-badri-idINKBN0JS06F20141214). 

He is not powerful enough to talk up the oil price. With Saudi Arabian strategy for a supposed market share, not going anywhere; and with Chinese slow down, oil prices have nothing to shield it from further falls. The West will also be happy to see the pressures on a defiant Russia. The Saudi lead in not prescribing a cut, also appears  indirectly  aimed at Iran as the latter  country will reel under the price fall; s Saudi Arabia has quite a large quantum of national reserves as a cushion; Iran does not have much staying power. Given the desperation of the non- reserve holding oil producers, to maintain revenues,  there will be quite a glut in the market in the coming week. Imagine Nigeria, Angola, Venezuela and similar!

The Japanese election results surprise none; it had already been factored in by the markets. The unpleasant surprise is the lower than usual turnout, which ignites cynicism in some measure and dampens Abenomics. So the results are not potent enough to trigger a move up.

It looks set of short on oil.

The Economist explains Why the oil price is falling

Effective Reading :

http://www.economist.com/blogs/economist-explains/2014/12/economist-explains-4?fsrc=scn/tw_ec/why_the_oil_price_is_falling

International Energy Agency: Oil Report bearish...

"The IEA Oil Market Report (OMR) for December cut the outlook for 2015 global oil demand growth by 230 000 barrels per day (230 kb/d) to 0.9 million barrels per day (mb/d) on lower expectations for the Former Soviet Union and other oil‐exporting countries."

http://www.iea.org/newsroomandevents/news/2014/december/iea-releases-oil-market-report-for-december.html

Oil Shorts

Oil keeps on falling and falling? The price levels look shakier by the day. Below $ 60.00 Looks heading south. Next week may see a further fall. Would not be surprised at around $ 50 in coming week .Strategic reserves look good. 
Winners are the non producers, the motorists and the households whose real incomes should increase.

"Be short on oil ; be short on commodities" may be the mantra...