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OPEC is concerned over the increased oil production.
Now we can see that the oil prices are going downwards. With the prices going downwards, we are seeing OPEC members facing concerns as Russia who heavily relies on petroleum products, would be getting them on the cheap.
The whole global economy is weak and we have seen Saudi Arabia cutting price instead of cutting its production. This has caused a scramble in the world market and it has upset a lot of people.
Crude oil prices are dropping and we saw a 23 percent drop since June. When we compare prices to the last 4 years, we will see that they have been the lowest in those 4 years.
A barrel would now cost $81.84. It was expected that nearly $200 billion would be going to the Organization of the Petroleum Exporting Countries but now it seems like it will remain with the consumers in oil importing nations which includes members of European Union, China and the United States of America.
Charging low prices hasn’t been good business for Saudi Arabia, Libya and Iraq and has pushed their budgets into the red and on top of that it has deepened budget deficits in oil exporting nations.
Because of the price drops, we have seen the wind taken out of the US shale oil producers. The US shale oil producers have seen their share prices fall down to 25 percent on average and this has happened in the last three months.
A Texas based Pioneer Natural Resources has last $10 billion in some 3 months period. Due to these price plunges, we have seen stagnant European economies.
The OPEC production has been rising to a 13 month high and it was all because of the recovery in Libya and because of the greater Iraqi output.
Saudi Arabia would cut productions so that they could increase the price but this was their usual practice in the last 4 years. Now they are going through a crucial time and they want to increase their production.
Source: WashingtonPost
