Saudi Arabia goes against oil cartel on production cuts

While most members of OPEC want to avoid any crash in oil prices and want to reduce OPEC's output in order to assure that, Saudi Arabia has taken a different line.

Opec ministers from Iran, Venezuela, Qatar, Libya and United Arab Emirates have all said in the past week that they want to focus on paring down excess supply above Opec's official ceiling at the meeting. The 10 Opec members with quotas produced about 28m barrels a day last month, about 1m b/d above the self-imposed limit.

Recent price falls have renewed the prospect of a possible cut of Opec quota limits. Most of the burden of any Opec output cut would fall on Saudi Arabia as it has been producing about 9.5m b/d since August, 890,000 b/d above its quota limit.

It may really come down to how hard the winter is going to be. If the demand for heating oil shoots up, then the prices may well stay in the $42-45 per barrel range all through the winter. On the other hand, however, if the winter is relatively mild we may see the oil prices easing in to high thirties.