Prices fell in early trading after Saudi Arabia's Oil Minister, Ali al-Naimi, said his country has 3 million daily barrels of spare capacity and will push ahead with projects to expand output. Oil futures plunged yesterday after al-Naimi said he saw no need for an emergency OPEC meeting to consider further cuts in output.
"The Saudis are saying that they don't want to be the swing producer," said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. "The Saudis have made substantial cuts, unlike a lot of the other OPEC members. Oil in a $40 to $50 range suits the Saudis much better than oil at $70."
You may be asking what this means.
Think about it in this light:
Iran exports about 2.5 million barrels of oil daily.
Iran has threatened to cut off export oil production if The US attacks or does anything to "undermine" Iran.
Iran has, essentially, no other export.
The Iranians have a big economic problem and need to keep oil prices high to fill the gaps in their economy.
The Saudis worry about loosing their power in the Middle East to Iran and its radical Shiite mullahs and aren't exactly thrilled with the idea of a nuclear Iran.