Perverse Central Bank Battle
In the perverse central bank battle to defeat price deflation, the central banks are having a rough go of things.
The price of West Texas Intermediate (WTI) light sweet crude is down 6 percent today to lows last seen late 2008 and January 2009.
West Texas Crude Monthly
There has not been a WTI monthly close lower than $38.69 since May of 2004 when it closed at $37.04. A chart of Brent crude looks similar.
Brent Crude Monthly
Saudi Arabia Throws Down Challenge
Last week, oil producers met. Some member states sought production cuts. Saudi Arabia responded with an Output Cut Challenge.
Saudi Arabia agreed to output cuts if rivals inside and outside the OPEC cartel agreed to cuts. This was a change in tone from Saudi Arabia, but no agreement was reached.
At an informal meeting ahead of last Friday’s official meeting, Russia and Iran Rejected the Saudi Proposal.
Saudi Arabia has long insisted it would cut production only if fellow OPEC members and non-OPEC countries joined in. The report quoted a senior OPEC delegate as saying the Saudis would agree to cuts if Iraq freezes production rises and Iran and non-members such as Russia, Mexico, Oman and Kazakhstan contribute.
But Russia and OPEC members Iran and Iraq quickly rejected the idea. OPEC and non-OPEC producers have not cooperated to tackle low oil prices since they joined forces 15 years ago to help the market recover from the 1998 financial crisis.
“We do not accept any discussion about increases of Iran production after the lifting of sanctions. It is our right and anyone cannot limit us to do it. We will not accept anything in this regard,” Iranian oil minister Bijan Zangeneh told reporters in Vienna before the informal meeting.
Oil Price Deflation Factors
Gas Prices Below $1.50
Gas prices are a function of oil prices, state gasoline taxes, and proximity to refineries. As of November 30, Gas Prices Fell Below $1.50 at some stations.
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