MOSCOW, November 13 (Sputnik), Ekaterina Blinova — Crude oil prices, which have been declining steadily since mid-June 2014, dropped below $80 on Thursday, November 13.
"Brent crude for December, which expires on Thursday, fell $1.03 a barrel to $79.35, its lowest since September 2010, before recovering slightly to around $79.50 by 1200 GMT. US light crude was down 40 cents at $76.78 a barrel," Reuters reported.
Reuters states, citing oil experts, that demand for oil from OPEC (Organization of the Petroleum Exporting Countries) members will reportedly decrease to 29.2 million barrels per day in 2015.
On November 27, members of the cartel will hold a meeting in Vienna aimed at considering measures to counterbalance a dramatic 30 percent drop in oil prices over the last five months. Experts are still intrigued to find out what particular moves Saudi Arabia, the most prominent and powerful OPEC member, will do in order to stabilize the prices.
"We do not set the oil price. The market sets the prices," Saudi Oil Minister Ali al-Naimi said, as quoted by Reuters, sparking a debate around whether the Kingdom is more concerned about preserving its market share, rather than supporting the oil price.
Experts and traders remain skeptical regarding a possible production cut by OPEC, although "Saudi Arabia's oil minister tried to calm the market Wednesday [November 12] by dismissing speculation that oil producers are engaged in a price war," the Wall Street Journal notes.
In its article "Cheaper oil: Winners and losers," published in October 2014, the Economist points out that Saudi "Prince Alwaleed bin Talal, an influential businessman, called lower prices a "catastrophe" and expressed astonishment that the government was not trying to push them back up." The media outlet went on to say that with the price at $115 per barrel the Kingdom makes about $360 billion "in net exports a year," but it would earn only $270 billion at $85. Any price below 80$ will evidently hurt Saudi Arabia's economy, while its "budget has almost certainly gone into the red." The media outlet adds, however, that the monarchy "can afford" lower oil prices due to its huge net foreign assets.
Olivier Jakob, a Swiss oil market expert believes, however, that Saudi Arabia "might be willing to let prices fall to as low as $75 a barrel before acting to stabilize the market," Reuters points out.
US crude oil stocks fell by 1.5 million barrels to a total of 373 million barrels last week, despite analysts predicting an 800,000 increase, the media outlet remarks, citing the American Petroleum Institute data.
According to the Economist, the impact of the oil price shock on the American economy "will be mixed."
"Analysts at Goldman Sachs reckon that cheaper oil and lower interest rates should add about 0.1 percentage points to growth in 2015. But that will be more than offset by a stronger dollar, slower global growth and weaker stock markets," the media source reports.
The Economist noted in October, that since shale oil production is expensive, the American oil-producers' earnings before interest would be reduced by 20 percent (at $85 per barrel), "and only four-fifths of shale reserves are economic to extract using current technology with Brent around $85."
The media outlet also noted that China and India would "unambiguously" benefit from the fall in oil prices, while Venezuela, Iran and Russia will face an economic slowdown.