Oil price falls as Saudi Arabia dictates OPEC cartel to hold production levels.

Oil price falls as Saudi Arabia dictates OPEC cartel to hold production levels. (Taz).

Saudi Arabia has bulldozed fellow members of the OPEC oil cartel to hold production levels at the current level, ensuring lower crude and petrol prices should continue for the foreseeable future, The Guardian reported.

The world’s most powerful oil-producing country is determined to keep down the value of oil in a bid to reassert the dominance of Opec against its new rivals, the shale companies in North America.

Saudi Arabia’s oil minister, Ali al-Naimi, insisted OPEC’s latest ministerial meeting in Vienna on Friday had been amicable, despite fears among some cartel members that a persistent oversupply of crude could push prices even lower.

The price of the key Brent blend crude fell $1.62 to $62 a barrel after the meeting and compares with the $115 seen 12 months ago before traders panicked about the scale of US output growth and faltering demand.

In fact, prices had been steadily recovering this year from a $45 low in January but continued gloom that they could remain low this year has led to major spending cuts by the oil industry in Aberdeen and other energy hubs.

Meanwhile, the price of unleaded petrol for cars has fallen to about 113p a litre in the UK compared with 130p a year ago. Diesel prices are down from about 135p a litre to 118p, according to the AA motoring organisation. Lower transport costs has helped many British industries and reduced the country’s inflation rate.

OPEC met last November and turned its back on oil producers’ usual reaction to lower prices, which is to rein in their own output. Saudi Arabia and some key cartel allies were convinced that OPEC’s interests were best served by keeping prices low, holding on to customers and trying to shut down US shale rivals, which face higher costs.

The strategy has continued and the Saudis insisted everyone was happy. “You’ll be surprised at how amicable the meeting was,” Naimi said as he left OPEC’s headquarters in Vienna.

He confirmed the group had agreed to stick to “the same ceiling”, even though some members of the oil cartel have been cheating on their quotas. Official production is 1m barrels higher than the 31m-barrel-a-day official output target.

Oil ministers from Iraq, Venezuela and Angola said this week that a price of $75 to $80 a barrel would be their preferred level.

But they will have to hope that global demand continues to improve to absorb the supply from Iran if a deal with the west over its nuclear programme is finalised later this month, which may end western sanctions on its oil exports. Hmmm.....If you're Canadian and wonder why you're still paying almost the same at the pump as last year...here's an explanation, for Ontarians You voted for Liberals so don't complain you got what you wanted and will get even more of the same!

 Related: OPEC’s 30 mbpd ceiling output stays on