Wall Street Journal
Russell Gold
Updated Dec. 12, 2014
How Crude Oil’s Global Collapse Unfolded
[Snip]
On July 1, Libyan rebels agreed to open Es Sider and Ras Lanuf, two key oil export terminals that had been closed for a year. Libyan oil cargoes sailed across the Mediterranean Sea into Europe. Already displaced from the U.S. Gulf Coast and eastern Canada, Nigerian oil was soon replaced in Europe, too.
Increasingly, shipments of Nigerian crude headed toward China.
Oil prices began to decline. By the end of July, a barrel of U.S. crude fell below $100. In early September, the IEA, a Paris-based energy watchdog, noted there had been a “pronounced slowdown in demand growth.” A month later, oil prices fell below $90 a barrel.
By the middle of September, Petroleum Intelligence Weekly, a widely read industry newsletter, said
both sides of the Atlantic Ocean were “awash in oil.” Nigeria, it declared, “needs to find new customers for its light, sweet crude streams in Asia.”Saudi Arabia didn't want Nigeria to develop long-term relationships with refinery buyers in Asia. In late September, the kingdom decided to shore up its hold on them by, effectively, holding a sale. The Saudis cut their official crude price in Asia by $1 a barrel; within a week, Iran and Kuwait did the same.Two weeks later, the IEA again lowered its full-year projection of demand growth by 200,000 barrels a day to a meager annual increase of 700,000 barrels, nearly half of what it expected at the beginning of the year. Oil prices fell nearly $4 a barrel on the news.
At this point, the oil market appeared to be in free fall. Of the 23 trading days in October, the price of crude fell by more than $1 on eight days. It rose by $1 on one day.
Traders’ attention turned to OPEC, which has traditionally played the role of market stabilizer by cutting production when prices fall and raising production when prices rise. Many OPEC members, reliant on the cash oil brings in to pay for generous social programs, didn’t want to cut.
Saudi Arabia’s powerful oil minister, Ali al-Naimi, was silent for weeks. The country had been burned in the past when it cut its oil output, only to see other countries continue to pump—and steal its customers.
And it was already feeling competition, says Abudi Zein, chief operating officer of ClipperData, a New York firm that tracks global crude movement. Colombia, which historically has sent most of its oil to the U.S., is finding its biggest buyer this year is China, a critical market for OPEC, he said.
“For the Saudis, Asia is their growth market,” Mr. Zein says. “The Nigerians and Colombians are being kicked out of their natural markets in North America. Saudi had to do something.”
http://www.wsj.com/articles/tracing-oil-price-plunge-back-to-texas-1418404579It sounds like the members of OPEC are all fighting with each other over the Asian markets.
Here's the oil price each country needs to balance their budgets:
Saudi Arabia $106
Russia $100
Nigeria $122
Venezuela $117
