The price of the "black gold" fell most in almost two months as Saudi Arabia broke the ranks by lifting production rates, triggering worries among some OPEC members and relief at petrol-intensive businesses.
The Dubai Mercantile Exchange (DME) Oman Oil contract fell by 2 percent oer the last seven days, trading at around 110 U. S. dollars per barrel. The sharpest week decline since August 1 was based on two reasons. Firstly, doubts among international investors came up that the positive effects the U. S. Federal Reserves' third round of monetary easing (QE3) to stimulate the economy would prevail over mid-term.
Even after the Bank of Japan joined the Fed's initiative on Wednesday by pumping up its asset-purchasing by 10 trillion Yen ( 128 billion U. S. dollars) to 55 trillion Yen (698 billion U. S. dollars), oil headed downwards. Secondly, Saudi Arabia said Wednesday it will increase domestic oil production from 9.9. million barrels per day to 10 million barrels, which represents a 30-year high "because recent increases were not justified," a Saudi official told the Financial Times.
But some members of the organisation of oil exporting countries, the OPEC, like Algeria, Iran and Venezuela oppose production increases because they need high oil revenues to deal with tough challenges in their domestic economies.
Already in January this year, before the European Union imposed an oil embargo against Iran, to force the country a more weaker stance on its nuclear energy program, which came into effect in July, Tehran has warned Riyadh not to increase production rates. Then at the Opec meeting on ministers' level in June this year in Vienna the cartel decided to keep the combined production at 30 million barrels per day, mostly due to the opposition of the aforementioned "renegade members" to step up the volume. Since June, the DME Oman contract surged by a around a third in value.
Others, such civil airliners, who heavily depend on fuel, might not agree. Akbar al-Baker, CEO of state-owned Qatar Airways said Tuesday in Doha that his carrier suffered "a small loss" in the last financial year which ended March 31 2012, without elaborating on the exact amount. On June 12, Emirates Airline CEO Tim Clark even called the surge in oil prices "criminal", after the Dubai- based flagship-carrier suffered a 72 percent profit decline in the financial year 2011/2012, blaming mostly high jet fuel prices. " Give us a Brent price of 80 U. S. dollars (which translates into a DME Oman contract of around 72 U. S. dollars) and the world economy will start moving again," said Clark.
While the struggle for the "right price" between producers and consumers is an old affair, the new rift in the OPEC became most visible this week.