News / Economy

    World Oil Prices Rise on Rumor of Saudi Production Cut

    FILE - Lower U.S. oil prices reflect a broad slump across world financial markets, Jan. 20, 2016.
    FILE - Lower U.S. oil prices reflect a broad slump across world financial markets, Jan. 20, 2016.

    Energy market watchers credit an increase in oil prices to rumors of a possible production-cut deal that would include Saudi Arabia, other OPEC nations and Russia. The average oil price had dipped well below $30 a barrel recently, but is now around $31.

    The rumor that has been circulating in oil markets around the world this week involves a possible deal between Saudi Arabia, other oil-producing states in the same region and Russia. The Saudis would be key, though, because of the desert nation’s large reserves and its ability to increase or decrease production to affect the world market acting unilaterally.

    In an interview with VOA, Jim Krane, geopolitical energy analyst at Rice University’s James Baker Institute for Policy Study, said that the Saudis would need some large oil-producing states outside of OPEC to cooperate, and they would need to see some cutbacks by large private oil companies as well.

    “When they see a large enough drop in production and investment and, if indeed, the Russians and a couple of others are willing to go along with it … I could see them cutting production,” Krane said. “If they did, it would probably be a modest reduction, and I would suspect it would be in heavy oil.”

    Heavy oil comes out of the ground without natural gas, which the Saudis rely on for much of their domestic energy. Citizens of the kingdom enjoy some of the lowest energy costs in the world.

    Krane says one reason Saudi Arabia might like a deal to stabilize international crude oil prices is that the current slump is taking a toll domestically.

    “The Saudis are very concerned about oil prices,” he said. “This is on everyone’s mind over there. We have a new king in power and some new administrators, who are launching some interesting new policies. We are seeing an increase in domestic energy prices in Saudi Arabia for the first time in decades. The price increases themselves have been modest, but the government is saying there are more to come.”

    Saudis wary of competition

    Krane, who recently visited Saudi Arabia and plans to return there next week, says Saudi leaders will be cautious about any deal because they are concerned about competition from the United States and Iran, which is expected to start selling more crude now that international sanctions have been lifted.

    The U.S. Energy Information Administration has said that the United States has even greater proven oil reserves than Saudi Arabia based on estimates of what could be produced from deep shale deposits. U.S. producers have used horizontal drilling and rock fracturing technology to free up both oil and gas trapped in shale rock deep underground.

    The slump in oil prices has driven some U.S. companies out of the shale fields, but others, working in lower-cost areas, have continued, adding to the glut of oil on the market.

    For this reason, Krane does not think the Saudi government will be in a hurry to make any deal to bring prices back up.

    “Longer term,” he said, “I think the Saudis see lower oil prices as good for them. Low oil prices can kind of rekindle global demand for oil and make oil competitive with other types of energy, including renewables.”

    Maintaining market share

    Saudi Arabia has been investing heavily in its own solar energy industry, which could one day provide revenue from exported electricity. Krane also thinks the Saudis see some long-term benefit in U.S. shale oil development if it would provide the world a steady source of oil to stabilize markets and take some of that burden off Saudi Arabia.

    But, he says, Saudi Arabia does not want to see too much competition develop and risk losing the market share that makes the desert kingdom a rich and important nation on the world scene.

    You May Like

    Video Democrats Clinton, Kaine Offer 'Very Different Vision' Than Trump

    In a jab at Trump, Clinton says her team wants to 'build bridges, not walls'; Obama Hails Kaine's record; Trump calls Kaine a 'job-killer'

    Turkey Wants Pakistan to Close Down institutions, Businesses Linked to Gulen

    Thousands of Pakistani students are enrolled in Gulen's commercial network of around two dozen institutions operating in Pakistan for over two decades

    AU Passport A Work in Progress

    Who will get the passport and what the benefits are still need to be worked out

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movementi
    X
    July 22, 2016 11:49 AM
    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.
    Video

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.
    Video

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.
    Video

    Video Poor Residents in Cleveland Not Feeling High Hopes of Republican Convention

    With the Republican Party's National Convention underway in Cleveland, Ohio, delegates and visitors are gathered in the host city's downtown - waiting to hear from the party's presidential candidate, Donald Trump. But a few kilometers from the convention's venue, Cleveland's poorest residents are not convinced Trump or his policies will make a difference in their lives. VOA's Ramon Taylor spoke with some of these residents as well as some of the Republican delegates and filed this report.
    Video

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.
    Video

    Video With Yosemite as Backdrop, Obama Praises National Parks

    Last month, President Barack Obama and his family visited some of the most beautiful national parks in the U.S. Using the majestic backdrop of a towering waterfall in California's Yosemite National Park, Obama praised the national park system which celebrates its 100th anniversary this year. He talked about the importance of America’s “national treasures” and the need to protect them from climate change and other threats. VOA’s Julie Taboh reports.
    Video

    Video Counter-Islamic State Coalition Plots Next Steps

    As momentum shifts against Islamic State in Iraq, discussions are taking place about the next steps for driving the terrorist group from its final strongholds. Secretary of State John Kerry is hosting a counter-IS meeting at the State Department, a day after defense ministers from more than 30 countries reviewed and agreed upon a course of action. VOA Pentagon correspondent Carla Babb reports.
    Video

    Video Russia's Participation at Brazil Olympic Games Still In Question

    The International Olympic Committee has delayed a decision on whether to ban all Russian teams from competing in next month's Olympic Games in Brazil over allegations of an elaborate doping scheme. The World Anti-Doping Agency recently released an independent report alleging widespread doping by Russian athletes at the 2014 Winter Olympics in Sochi. So far, only Russian track and field athletes have been barred from the Summer Games in Brazil. VOA's Zlatica Hoke has more.
    Video

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.
    Video

    Video Millennials Could Determine Who Wins Race to White House

    With only four months to go until Americans elect a new president, one group of voters is getting a lot more attention these days: those ages 18 to 35, a generation known as millennials. It’s a demographic that some analysts say could have the power to decide the 2016 election. But a lot depends on whether they actually turn out to vote. VOA’s Alexa Lamanna reports.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9079
    JPY
    USD
    106.10
    GBP
    USD
    0.7636
    CAD
    USD
    1.3106
    INR
    USD
    67.076

    Rates may not be current.