Discord at OPEC is turning into a price war, loosening the cartel’s grip on the oil market and exacerbating a recent steep selloff.
Fissures have widened as Mideast turmoil frays political alliances and producers vie for customers amid a flood of oil from the U.S. and slowing growth in Asia.
“No one is telling anyone what they are up to,” one Gulf oil official said.
Saudi Arabia last week unilaterally lowered the price it charges for crude scheduled for delivery next month—without the typical consultation with other members of the Organization of the Petroleum Exporting Countries, according to OPEC officials. The decision surprised many market watchers, who were expecting the Saudis to cut output to help boost prices, and sent prices hurtling lower.
The Saudi decision followed a similar move by the kingdom and Kuwait to lower prices for delivery this month, without informing other OPEC members, according to OPEC officials, effectively undercutting fellow members.
“If members don’t cooperate, which is likely, everyone is in trouble and prices will drop even further,” said another OPEC official from a Persian Gulf state.
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(via WSJ Blogs)