Commodity Daily News

Reduced Oil Output Has Little Impact on Price

Oil prices fell for a second day Tuesday despite recent sentiments expressed by the Organization of Petroleum Exporting Countries (OPEC) and Saudi Arabia in particular. The oil cartel insisted on Monday that global supply was adequate and blamed market speculation and a variety of unrelated factors for the recent run-up in price.

To affirm the notion that supply was suitable to current demand, Saudi Arabia announced a decision to scale back its oil production. The move was unexpected given that the price for a barrel of oil is currently trading over $105 a barrel.

Saudi oil ministers expressed their expectation for a steep fall back in oil prices as global demand begins to slump from worldwide debt concerns. If true, the cutback appears to signal that Saudi Arabia desires prices to remain as high as they are by pushing against any sharp downward movements. Traders may want to begin expecting the price downfall, but current technical data suggests the price is well supported above $100 a barrel.