OPEC's War on OPEC

Summary

OPEC's greatest competitor is now OPEC. 

The real reason OPEC oil production levels will remain high. 

What the market is transitioning into. 

Is a real free market oil industry emerging? 

There are a lot of variables behind the reason the price of oil has plunged, as producers ramp up production in an attempt to maintain market share.

When Saudi Arabia and OPEC decided to boost production in response to the serious threat of U.S. shale oil, that was the primary impetus behind pushing prices down, in order to put extreme pressure on the quickly-growing shale competitors before they were too big to be dealt with.

As time as passed though, and U.S. producers have been forced to lower production levels and reduce exploration and development spending, a scenario has emerged that has gravitated to OPEC itself.

With Iran about to be released from sanctions, it has aggressively and publicly stated it will take steps to gain back market share it has lost, and will do what's best for the country, which was a reference to ignoring anything Saudi Arabia had to say about it.

more on OPEC battling OPEC

Nordea Bank Sees $100 Oil

A report from Nordea Bank AB said they see oil reaching $100 a barrel by 2012, based on their belief there will be an economic recovery and growth in 2011.

Estimates for the company have oil prices averaging $79 a barrel in the fourth quarter of 2010, increasing to $85.75 in 2011, and to average $102.50 in 2012.

Nordea analyst Thina Saltvedt, said in the report, "In the short term, there is a risk that prices may fall below the underlying trend as fears of a new recession in the U.S. may intensify and weigh on risk appetite. In the medium term, oil prices may surprise on the upside if the rebound in the world economy and the demand for oil is stronger and the increase is more rapid than expected."

Nordea also feels the extra oil capacity of OPEC will drop near the end of 2011, and at that time they believe economic growth will be starting to take off, driving oil prices up.

At that time they also think major oil fields will have pressure upon them to develop even quicker in response to increased demand.

OPEC May Increase Production if Oil Prices Go Over $100 a Barrel

OPEC May Increase Oil Production if Prices Go Over $100 a Barrel

OPEC will change its production levels if the price of oil goes above $100 a barrel, said Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah today.

Even so, Sheikh Ahmad that considerations would have to be taken into account concerning supply and demand when making decisions.

For now, oil prices at about $85 a barrel are considered a good price by OPEC, and that isn't anticipated to change much, although some think it'll go much higher as the summer period comes.

I don't think so though, as the so-called recovery isn't really one, as data continues to come out showing increased loss of jobs and foreclosures.

That will keep oil demand from rising, along with oil prices.

Commodities: OPEC Slashes Oil Production

OPEC Continues Cutting Oil in Effort to Support Prices

In a dramatic emergency meeting meant to shore up the plunging price of oil, OPEC slashed oil production by 1.5 million, in the middle of the expected 1 million to 2 million barrels analysts were looking for.

Even though OPEC will cut production dramatically, crude prices responded by falling another 5 percent; evidently speaking to demand, which isn't going to change in the current economic crisis, which has consumers cutting back on any unnecessary spending or traveling.

OPEC is of course cautious in their approach, as some of the other oil-producing nations pressured them to cut production by at least 2 million barrels a day. The problem they face is if they cut it too much, and prices surge too high, consumers will cut back even more on expenses, and the plan would backfire.

All this has done for OPEC is offer the possibility of neutralizing or slowing down the fall; it won't make prices go up much higher ... if at all.

OPEC President Chakib Khelil confirmed this saying the intention of the production cuts was to limit the fall in oil prices, not an attempt to increase them.

Khelil was quick to add that even with the idea of consumers cutting back if prices go too high is part of their decision, they will cut production even more if crude prices drop to unsustainable levels.

On the New York Mercantile Exchange today, oil futures fell at one point to under $63 a barrel, while they were at $64.51 a barrel at around noon EST.

What it looks like OPEC is attempting to do is stop the price drop per barrel at about $60.

At this point nothing OPEC is doing is doing in cutting oil prices is keeping the price of oil stable.

Oil Reaches Another High on U.S. Inventory Concerns

Oil prices climbed to almost $106 a barrel, as inventory surprisingly fell by 1.3 million barrels, after seven straight increases.

Most of that was in response to U.S. supplies being lower than expected.

Other problems affecting the price were the recent decision by OPEC to not increase production, as well as the continuing tensions between Columbia and Venezuela.

Oil inventory as of the early part of 2009 has dramatically changed, as the contango, or rather - super contango conditions has resulted in oil futures buyers starting to store there oil as oil futures prices stretch out more predictably, and the perfect arbitrage opportunity exists for those looking for something that is not only safe to invest in for 2009, but will also make them some money.

The super contango for oil is one of the few guaranteed commodity futures winners for 2009, and one of the few overall investment winners overall.

Commodity investing in certain sectors will be the best investment over the next several years, and those investing in strategic commodity sectors will do very well.