By Isaac Cohen*
Oil prices tumbled 22 percent in November, from a peak in October, in both the global Brent and the US West Texas Intermediate benchmarks. Such pronounced fall was not seen since the start of the Great Recession a decade ago. It also brings back recollections of the plunge in 2015, when West Texas oil fell from a peak of $110 to $27 per barrel. Until now, the present fall is less severe, from $77 to $50 per barrel.
However, it is becoming a source of anxiety the fact that it is difficult to anticipate if, next Thursday in Vienna, the Organization of Petroleum Exporting Countries (OPEC) and non members will approve the production cut of 1.3 million barrels recommended by OPEC economists. This requires that Russia and Saudi Arabia, the two major producers, come to an agreement. OPEC is also challenged by the announced withdrawal of Qatar from the organization, a producer of only two percent of total output, but a member for almost six decades.
The other major producer of oil is the United States, whose production increased, according to the Energy Information Administration, to 11.5 million barrels per day in September from 11.4 million barrels per day in August, or 21 percent more than a year ago. At such a pace, the United States in 2019 will become the major world oil producer. Therefore, a deeper slump in prices will hurt investors and energy companies, at a time of intense volatility in the stock market.
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.
