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    The Day That OPEC Died: Saudis Aim to Bankrupt Cartel, Seek Oil Monopoly

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    The oil export alliance failed to reach an agreement to cap production on Thursday. Saudi Energy Minister Khalid al-Falih again walked away from the table as the kingdom looks to consolidate market share.

    The collapse in negotiations, along with a forward-looking refusal by the influential Saudi delegation to consider capping production, means a free-for-all fight for market share among the world’s oil producers that is all but certain to lead to collapsing oil prices.

    Economic analysts have already raised the alarm that oil-export dependent countries like Venezuela, Algeria, and war-torn Libya, who lack access to global credit markets, will be unable to weather the storm, leading to humanitarian crises and widespread social strife.

    Why is Saudi Arabia pushing for overproduction?

    In February 2016, world oil prices cascaded to $27 per barrel, down from a July 2008 peak of $145 per barrel, as the Saudis ramped up oil production from a 2009 dip. In the midst of the 2008 market crash, Saudi’s top oil official, Deputy Crown Prince Mohammad bin Salman, called for the kingdom to immediately increase oil production to 11.5 million barrels of oil per day, and then to 12.5 million barrels daily by the end of 2016.

    Energy market analysts initially scoffed at the aggressive move to undercut world oil prices, noting that Saudi Arabia’s own budget is dependent on a $66.70 per barrel oil price, with oil-extraction prices much higher for other OPEC countries. Market watchers predicted that Saudi Arabia would eventually push the oil alliance to cap production so as to keep prices at economically sustainable levels.

    Saudi Arabia instead sought to increase market share when competitor peers were at their most vulnerable. North American oil producers, unlike Saudi Arabia, are not state-sponsored enterprises propped up by government handouts during down markets. When these US and Canadian oil resource industries fell into bankruptcy they became ripe for capture by foreign investors.

    As energy analyst Marin Katusa told Radio Sputnik, Saudi Arabia has swooped into the North American energy market, through private equity firms, buying US and Canadian fracking technology and oil fields at pennies on the dollar.

    Similarly, the kingdom looks to rebuff efforts by other OPEC members to expand oil market share. By pushing oil prices to their lowest level in years, the Saudis look to not only bankrupt Western oil companies, but also render insolvent entire oil producing states in order to snatch up foreign oil resources on the cheap.

    Oil prices have recovered some in recent months, to $49 per barrel, due to oil disruptions in Canada after the Fort McMurray fire and oil extraction remaining offline in war-torn Syria, Iraq, and Nigeria.

    Before Thursday’s OPEC meeting, Radio Sputnik sat down with Justin Dargin, Global Energy Scholar at the University of Oxford to discuss the fracturing of OPEC and the kingdom’s plans to corner oil energy markets.

    Do OPEC member states face a fiscal crisis if an agreement is not reached?

    "Yes, the breakeven oil price, which is the price that most OPEC member states need for their budgets to remain solvent, for most Gulf States, is between $80 and $100 per barrel, to maintain their budgetary outlays without having to go into some kind of major deficit," said Dargin. "The price currently is not viable for the long term, but I believe there is this sentiment for the OPEC members that prices may rebound in the future."

    The analyst suggested that the market rebound over the past few months may be little more than an oasis for the smaller, fiscally-strapped OPEC member states, based primarily on seasonal demand changes, especially an increase in demand during the summer for air conditioning, travel, and leisure.

    Dargin noted that he does not expect that market prices will recover in the near-term, citing a lack of structural changes in the market after prices collapsed to a low of $27 in February.

    Can smaller OPEC member states survive these historically low prices?

    "We can see already that in the case of Venezuela that they are not weathering it very well and they don’t have as much sway in OPEC as other members," said Dargin. "It will be quite hard for Venezuela and the smaller producers to encourage or force Saudi Arabia to come to an agreement."

    "Many of these smaller oil producers like Venezuela and Algeria will not be able to weather the storm and it will be a very rough road ahead," he said.

    Related:

    LUKoil Head Says Outcomes of OPEC Session Predictable
    OPEC to Boost Cooperation With Non-Cartel Oil Producers, Russia
    Next OPEC Meeting to Take Place on November 30
    Nigeria’s Barkindo to Become New Secretary-General of OPEC from August 1
    Tags:
    ruble, oil export, oil production, cartel, oil crisis, falling oil prices, PetroChina, Saudi Aramco, BP, Royal Dutch Shell, ExxonMobil, OPEC, Nicolas Maduro, Fayez Sarraj, Abdelaziz Bouteflika, Justin Trudeau, Barack Obama, Hassan Rouhani, Ayatollah Ali Khamenei, Marin Katusa, Brian Becker, Bill Farren-Price, Khalid Al-Falih, Mohammad bin Salman Al Saud, Salman bin Abdulaziz, Russia, Canada, United States, Algeria, Libya, Iran, Venezuela, Saudi Arabia
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    • avatar
      michael
      such actions can lead to war unfortunately.
    • Marc Nonnenkamp
      The demise of OPEC has been long in coming - no more unity, and a falling global market share.
    • choticastile
      Saudis digging their own grave .. shown themselves as the ultimate racketeers, their god is wealth and the power -- delivered by oil. Common decency and respect for OPEC partners was never there and so-called Saudi royalty an unholy lot, complete strangers to common global integrity. Just as well that OPEC falls apart and dies and the smaller oil countries grow the balls (as a guy on FB correctly remarked) in that these countries should announce they no longer accept payments in $US. That the global economy continues to be hijacked by a bunch of immoral and spiritually bankrupt fiends, has become untenable and sure as God made little apples, it will not continue for much longer.
    • choticastilein reply tomichael(Show commentHide comment)
      michael, If you refer to Saudi actions leading to war -- is that not exactly what these *ssholes want? Its convoluted as hell -- double games to the nth degree the global bankster gangsters in one bed all the way. US Zio big shots's aim has always been the complete destruction of America -- their one plan only 'full spectrum global dominance' -- but the idiots will never achieve it -- all of it smacks of increasing desperation.
    • avatar
      michaelin reply tochoticastile(Show commentHide comment)
      choticastile, saudi as well as american I was thinking. The actions of the us prior to Pearl, always two sides play the games. :)
    • choticastilein reply tomichael(Show commentHide comment)
      michael, The whole planet has since forever been hijacked by the global bankster gangsters -- they run the whole bloody show we live in -- generally speaking people are completely unconscious of and unaware of the fact that we live in a matrix created by these global fiends. Check out what Jon Rappoport has to say about it (perhaps you're aware of his writings). A few countries have gotten off this bus -- Russia the only world power yet to tell these psychopaths to get lost and you can see what lengths these monsters will go to, to achieve their agenda of full on global domination by how they're hunting down Russia, as we speak! -- The one country, which they will never enslave ever again!

      Michael, we can no longer afford not to become completely informed about how these people have literally stolen America from ordinary American folks, how the west through its central banks, have stolen all countries' sovereignty -- keeping countries and their people enslaved all over the world -- through owning and controlling their money. Thus, their cunning in playing the game both sides, go beyond what most downright honest people globally can even begin to conceive of or understand.
    • avatar
      michaelin reply tochoticastile(Show commentHide comment)
      choticastile, thanks for reminding me about Jon R, time to go back and do some reading. I agree about being informed. The next step is what to do practically to make the game not worth the playing? Thanks! :)
    • choticastilein reply tomichael(Show commentHide comment)
      michael, My pleasure -- my memory too, often is refreshed by others, as global affairs, evermore frenetic, increasingly change even within hours today ... so one sometimes forgets the real hard hitting fighters out there! However, I receive JR's newsletters -- sadly have never had money to buy his books, but glean so much from only his newsletters! His explanations are given with such unbelievable clarity and the fact that he is fearless in calling a spade a spade, is way beyond admirable!

      Like Professor Henry Makow, Rappoport too is in the right position to call out the people who dare accuse him of anti-Semitism. Makow too, is as fearless any day as Rappoport.

      Only thing is that Prof Makow, still reserves his right to not embrace Vladimir Putin at this point, as he still considers Putin is Illuminati!! I nag the Prof about it every now and then, but in fairness to him, he has told me that like me, he too wants to believe more than anything else that I am right in stating that Putin is not Illuminati and that he is wrong! Maybe I should have taken an all time bet with him! (laughing) -- still, to my mind the prof too, is truly a special human being!
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