Oil exporters face lower prices, diminishing demand and falling revenues

28-Nov-08

Falling oil prices accompanied by deteriorating global demand and falling revenues has shrouded OPEC members with grave concern, on the eve of its meet in Cairo. The oil cartel seems to be in deep quest of a solution for falling oil prices that have dropped by almost 100 dollars in 100 days. A unanimous decision among OPEC members seems ambiguous among the moderate members led by Saudi Arabia, that can afford a period of lower oil prices, and countries like Iran and Venezuela with high government spending which have become much more dependent on high prices. Over the past two months, the market has seen very little effect of the 2 mln bpd output cut announced by OPEC in a bid to control falling prices. Since the last OPEC meeting about a month ago, oil prices have almost halved. At this meeting, few OPEC members are pushing for a further 1 mln bpd cut, but OPEC chief feels a need to evaluate how well producers are currently complying with their prior commitments before agreeing to a new cut. Russia, a non OPEC member might also reduce its output in sync with OPEC, as the country requires a price of US$95 a barrel next year, otherwise its budget would be strained and its currency would suffer.