It had occurred to me that impacts on oil prices are one reason the other arab nations might not be too pleased with OBL.

http://www.boston.com/dailynews/320/world/Plummeting_oil_prices_could_br:.shtml

Plummeting oil prices could bring badly needed relief to battered U.S. economy

By William J. Kole, Associated Press, 11/16/2001 07:08

VIENNA, Austria (AP) Oil prices plunged to their lowest level in more than two years despite efforts by OPEC to stop the free fall, which analysts said could further push down prices at the gas pump.

Setting up a showdown with Russia and other producers outside the cartel, the Organization of Petroleum Exporting Countries struggling to stabilize plummeting prices agreed Wednesday to cut output beginning next year, but only if non-OPEC producers also tighten their taps.

OPEC delegates said they would reduce their daily production target by 1.5 million barrels, or 6 percent, starting Jan. 1, on the condition that outsiders such as Russia, the world's No. 3 producer, cut their own output by 500,000 barrels a day.

As the market moved closer to an oil price war, traders reacted almost instantly to the uncertainty with a sharp sell-off in petroleum futures.

December crude oil futures dropped as low as $17.15 a barrel on the New York Mercantile Exchange on Thursday before closing down $2.29 at $17.45 a barrel, the lowest level for a front-month contract since June 1999.

December heating oil futures tumbled 5.03 cents to close at $51.09 a barrel, their lowest level since August 1999, while the December gasoline futures contract ended down 4.53 cents at 48.84 cents a gallon, a 29-month low.

The global economic slowdown has dented demand for crude, and lingering uncertainty from the terrorist attacks on the United States has worsened OPEC's financial problems. Prices have tumbled by a third since Sept. 11 alone.

Although analysts warned that a prolonged slump in oil prices could discourage companies from exploring new fields and developing older ones setting the stage for sharply higher prices in the future the immediate fallout could be lower prices for consumers for gasoline and home heating oil.

For the short term, at least, they could also provide relief to airlines skirting bankruptcy since the attacks by cutting prices for jet fuel, and help truckers by easing diesel prices.

''This is good news for a world economy that could use a boost right now,'' said Carl Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y.

But in the longer term, the unfettered drop in crude prices will hurt the global economy, experts say.

''I think we don't want to see a collapse in oil prices,'' said Joe Quinlan, international economist at Morgan Stanley in New York. ''Sure, it's a near-term positive for the global economy but it doesn't do any good for developing countries.''

OPEC supplies about a third of the world's oil and has a daily production target of 23.2 million barrels. It has already curtailed its official output this year by 3.5 million barrels a day without a meaningful contribution from non-OPEC producers.

On Thursday, its most powerful member Saudi Arabia, the world's top oil producer revealed its frustration at Russia's refusal to make anything more than a token cut in output. OPEC sees Russia's cooperation as an essential part of the group's effort to stem the collapse in oil prices.

OPEC would ''absolutely not'' cut production without a corresponding decrease of 6.5 percent in oil exports from Russia, Oman, Mexico and Norway, Saudi Oil Minister Ali Naimi told reporters.

''We are in a crisis mode and we need help,'' he said.

In a note of brinksmanship, Naimi said OPEC would pursue its strategy of shared output cuts even at the risk of seeing prices fall further ''until everyone cooperates.''

Kuwaiti Oil Minister Adel al-Sabeeh said Thursday that crude prices could fall as low as $10 a barrel if the current standoff between OPEC and non-OPEC producers over oil output persists.

Russia's second-biggest oil company reacted lukewarmly.

''I found this offer unacceptable, and Russia could only talk about a medium- and long-term output ceiling,'' said Mikhail Khodorkovsky, chief executive of OAO Yukos.

Because their oil fields are located mostly in Siberia and frigid northern areas, Russia's oil companies must keep their equipment running to keep their wells from freezing over, Khodorkovsky said in Moscow.

''We are unable to regulate our output just by turning a knob as the OPEC and southern non-OPEC countries can,'' he said.

-- Anonymous, November 16, 2001

Answers

http://www.boston.com/dailynews/319/world/Saudi_Arabia_s_oil_minister_ wa:.shtml

Saudi Arabia's oil minister warns Russia of a price war if OPEC sees no help on output cuts

By Bruce Stanley, Associated Press, 11/15/2001 14:38

VIENNA, Austria (AP) The specter of an oil price war loomed nearer Thursday when OPEC's most powerful member said the cartel would let crude prices fall, if necessary, as a way of pressuring producers outside the group especially Russia into cooperating with its plan to cut output.

Saudi Arabia, the world's No. 1 oil producer, dominates the Organization of Petroleum Exporting Countries, and the candid comments of its oil minister, Ali Naimi, revealed its frustration at Russia's refusal to make more than a token gesture to tighten its taps.

Russia is the third-largest crude producer. OPEC sees its cooperation as an essential part of the group's effort to stem the collapse in oil prices.

The global economic slowdown has dented demand for crude, and lingering uncertainty from the terrorist attacks on the United States has exacerbated OPEC's financial problems. Prices have tumbled by a third since Sept. 11 alone.

This may be good news in the short term for consumers, though prices for gasoline and heating oil have already come down from earlier highs this year.

However, a prolonged slump in oil prices could discourage companies from exploring new fields and developing older ones. That could reduce available supplies in the long term and set the stage for sharply higher prices in the future.

OPEC delegates meeting Wednesday in Vienna agreed to reduce their daily production target by 1.5 million barrels, or 6 percent, starting Jan. 1, but only if non-OPEC producers cut their own output by 500,000 barrels a day.

OPEC would ''absolutely not'' cut production without a corresponding decrease of 6.5 percent in oil exports from Russia, Oman, Mexico and Norway, Naimi told reporters.

''We are in a crisis mode and we need help,'' he said.

OPEC supplies about a third of the world's oil and has a daily production target of 23.2 million barrels. It has already curtailed its official output this year by 3.5 million barrels a day without a meaningful contribution from non-OPEC producers.

In a note of brinksmanship, Naimi said OPEC would pursue its strategy of shared output cuts even at the risk of seeing prices fall further, ''until everyone cooperates.''

Mexico said late Wednesday that it would trim oil exports by up to 100,000 barrels a day in 2002.

However, the initial reaction to OPEC's conditional offer from Russia's second-biggest oil company was less encouraging.

''I found this offer unacceptable, and Russia could only talk about a medium- and long-term output ceiling,'' said Mikhail Khodorkovsky, chief executive of OAO Yukos.

Because their oil fields are located mostly in Siberia and frigid northern areas, Russia's oil companies must keep their equipment running to keep their wells from freezing over, Khodorkovsky said in Moscow.

''We are unable to regulate our output just by turning a knob as the OPEC and southern non-OPEC countries can,'' he said.

Oil markets fell again Thursday, after posting steep declines the previous day. January contracts for North Sea Brent crude hit a low for the day of $18.35 a barrel before rebounding somewhat to $18.81, down 36 cents from Wednesday's close on the International Petroleum Exchange in London.

Light, sweet crude for December delivery dropped to $18.86 a barrel in pre-session electronic trading on the New York Mercantile Exchange, before rising to $19.21, down 69 cents.

Russia has offered to cut its production by 30,000 barrels a day, less than 0.5 percent of its total output. Naimi called the offer ''very disappointing.'' Mexico and Oman are the only other independent producers pledging to cooperate with OPEC.

''It's important that Saudi Arabia and Russia work together to support the oil market,'' Naimi said. ''Both of us will be the biggest losers if prices go down. Both will be the biggest gainers if prices go up.''

The United States is the world's No. 2 oil producer, but unlike Saudi Arabia and Russia, it consumes most of what it pumps.

Russia has boosted its output by about 500,000 barrels a day this year and is expected to pump an additional 420,000 barrels a day in 2002. Global demand for crude, meanwhile, has increased this year by just 100,000 barrels a day.

Industry analysts say major independent producers are reluctant to cooperate with OPEC-led production cuts unless they see OPEC members making a serious effort to keep from busting their own quotas. OPEC currently pumps at least 800,000 barrels above its daily target.

''In many ways, it's a game of chicken,'' said Yasser Elguindi of Medley Global Advisors, a New York consultancy.

-- Anonymous, November 16, 2001