The oil price retreated once again overnight following comments from Saudi Arabia and other oil ministers, who reiterated that production would not be cut.
The price of oil has dropped nearly 50% over the last six months with supply now heavily outweighing demand. OPEC, which is a cartel-like group, passed on the opportunity to relieve pricing pressure late last month, when it decided not to curtail production from its current 30 million barrels per day ceiling.
Although the lower oil prices are no doubt harming the OPEC nations – which include countries such as Iran, Iraq, Saudi Arabia, United Arab Emirates and Venezuela – they seem more than prepared to wade out the recent price slump. After all, U.S. shale oil production carries higher costs, so many projects could become uneconomic in the near future which would likely see oil prices rise once again.
As quoted by The Australian Financial Review, Saudi Oil Minister Ali al-Naimi said: "If they (countries outside OPEC) want to cut production they are welcome: We are not going to cut, certainly Saudi Arabia is not going to cut." He added that he was "100 per cent not pleased" with the price falls, but was confident they would improve sometime in the future.
The remarks have led to further uncertainty in the markets, causing Brent oil to retreat US$1.10 to US$60.28 a barrel. Producers such as BHP Billiton Limited (ASX: BHP), Senex Energy Ltd (ASX: SXY) and Sundance Energy Australia Ltd (ASX: SEA) have all been hit hard as a result, with their shares down 2%, 7.3% and 12.6% today, respectively. The sector has acted as a drag on the overall S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), which has retreated 0.4% for the day.
