Word: nigerias
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Behind OPEC's crisis is the continuing worldwide glut of oil that is forcing down prices. Three weeks ago Britain and Norway, which are not OPEC members, lowered their charge for North Sea oil by $3 per bbl., to $30.50. Nigeria, a member, promptly retaliated by cutting the price of its premium-quality crude by $5.50, to $30 per bbl. That put enormous pressure on the other OPEC countries to make big cuts...
...London meeting, the Saudis and their gulf allies suggested that the OPEC price be dropped $4, to $30. At the same time, they insisted that Nigeria boost its charge to $31.50. Reason: Nigeria's so-called sweet crude yields a particularly desirable mix of products after refining, so the Saudis must charge less than Nigeria to stay competitive. Nigeria, fearful of losing sales to its North Sea competitors, is so far sticking with its price...
...cutting actually started two weeks ago when Britain and Norway, which are not OPEC members, dropped their charge for North Sea oil by $3 per bbl., to $30.50. This precipitated the first public break in OPEC ranks. Nigeria, blessed with very high-quality crude oil and burdened by heavy debt, said it was slashing its price...
...announcement was stunning, not only for the historic implications of the crack in OPEC but also because the cut is even larger than it seems. A barrel of Nigeria's Bonny Light crude, once refined, yields a higher-priced product mix than does the Arabian Light oil on which the OPEC bench-mark price is based. The Saudis used to insist that the "differential" should be $3, but more recently have reportedly been willing to accept $1.50. Even at that, the official OPEC price would have to fall to $28.50 to make it competitive with $30 Nigerian...
...gulf members intend to present their new price, whatever it is, to the rest of OPEC on a take-it-or-leave-it basis. By far the largest producers in OPEC, they could send prices through the floor if they chose to pump flat out. The threat could bring Nigeria and other wayward nations into line. As Mani Said al-Oteiba, oil minister for the United Arab Emirates, declared after the two-day Riyadh meeting, "If the other OPEC nations do not accept this accord, the gulf states will have to cut the price even more...