Oil price plunges to $69.08, lowest in seven years

Crude oil price plunged to a seven-year low as trading opened on Monday, five days after the Organisation of Petroleum Exporting Countries, OPEC, resolved at the end its meeting in Vienna, Austria to keep its December 2011 production quotas.

OPEC Secretariat calculations showed the price of OPEC basket of 12 crudes, which stood at $68.89 per barrel on Friday, rose marginally, with Brent crude price rising to $69.04 per barrel on Monday, the lowest level close to the price of $69.08 per barrel attained in 2007.

On the New York Mercantile Exchange, NYME, light sweet crude futures for delivery in January trading was $66.15 per barrel after shedding $7.54, or 10 per cent from $73.69 per barrel at the close of trading on Thursday shortly after the OPEC meeting.

However, days after the OPEC meeting, indications are that the resolution to keep production quotas at 30 million barrels per day may have failed to halt the decline in crude oil prices, with losses at more than 40 per cent since a peak level above $100 per barrel in June.

At the OPEC meeting, members, led by Saudi Arabia, the world’s leading oil producer, were said to have engaged in a game of hard balls, as they canvassed positions aimed at putting pressure on the United States to cut down on its Shale oil project in a bid to stem declining crude oil prices.

Saudi Arabia was said to have buttressed its argument against a proposal for production cut on its experience in the 1980s, when prices fell and the country rushed into cutting its oil production to strengthen only for the price to keep declining, resulting in its loss of market share.

With huge foreign-exchange reserves, the Saudis were said to have indicated that their country had the capacity to finance its budget deficits with lower prices crashing to below $80 per barrel in the short term.

Nigeria was voted in favour of production cut as a way of firming up prices, even as the toll on its economy forced government to announce some fiscal and monetary controls to stabilize the economy.

At the end, the resolution was that OPEC would allow prices to continue falling, with the expectation that most of latest shale oil drilling projects in North America would become unprofitable and forced to shut down.

Analysts say oil prices were likely to continue dropping till demand improved, though the level to which it would fall remained unpredictable.


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  • kwango

    People fail to realise how much oil theft contributed to the continued decline in oil price. The oil thieves have saturated Europe and Asia with supply which they have stored over the years and are now buying less. By exporting such irresponsible corruption and sabotage, Nigeria has helped to depress international oil prices and shortchange their own income. Few months ago a sitting Governor Uduaghan announced at Abuja that oil theft has reduced from 100,000 per day to about 40,000. He has statistics about illegal activity but none about legal activity. Are we surprised?

    • Guguru

      Amazing! Thanks for sharing.

  • amazing2012

    Oil theft or not the problem is from government administrative policies: for instance to get a license to lift crude you will need connection, corruption and distressful bureaucracy fron one office to another. This attitude alone can takes months or years for clearance and eventual lifting of the crude.
    Second reason is global politics that result to economic sanctions on some countries which force the countries go behind the norlmal procedures to buy crude oil from all available means.
    Stolen crude oil is good business because is cheaper, easier to get and off record. So if the world want to stop crude oil theft, they have to first make it easier and open the opportunity for other marketers to procure license and process their products. The world countries should consider changes in sanction procedures to exclude energy, this means those countries to have access to crude oil through legal means.
    Third reason is insecurity in almost all the crude oil countries fueled by arms proliferation and politics.

  • Ette

    Just what is expected from the presidency of the greatest oil thief, N10b worth of private jet trips maker and most corrupt oil minister. Shame as you are presiding over the economic backwardness of your country occasioned by your inability to gather support to halt the drifts through supply cut or other policy variables. Incompetence manifesting already as you cannot give what you do not have.

  • Guguru

    Jonathan says he is transforming Nigeria. But he never told us that the transformation was dependent on crude prices staying eternally high. So, if crude prices suddenly fell, what transformation would we be expecting from Jonathan? In the coming months, Nigeria will feel the sort of pain we once endured during the Structural Adjustment Program (SAP). It will not be as intense as SAP but it will be intense enough for the younger generation to question the very meaning, purpose, and existence of Nigeria. I see a possible Burkina Faso if crude prices plunge to $50 per barrel while staying there at that price for an extended period of time.