By Nihan Cabbaroglu
Saudi Arabia plans to sell oil cheap for political reasons, one analyst says.
To pressure Iran to limit its nuclear program, and to change Russia's position on Syria, Riyadh will sell oil below the average spot price at $50 to $60 per barrel in the Asian markets and North America, says Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil Policies and Strategic Expectations Center. The marked decrease in the price of oil in the last three months, to $92 from $115 per barrel, was caused by Saudi Arabia, according to Abanmy.
With oil demand declining, the ostensible reason for the price drop is to attract new clients, Abanmy said, but the real reason is political. Saudi Arabia wants to get Iran to limit its nuclear energy expansion, and to make Russia change its position of support for the Assad Regime in Syria. Both countries depend heavily on petroleum exports for revenue, and a lower oil price means less money coming in, Abanmy pointed out. The Gulf states will be less affected by the price drop, he added.
The Organization of the Petroleum Exporting Countries, which is the technical arbiter of the price of oil for Saudi Arabia and the 11 other countries that make up the group, won't be able to affect Saudi Arabia's decision, Abanmy maintained.
The organization's decisions are only recomendations and are not binding for the member oil producing countries, he explained.
Another analyst took issue with Abanmy's views, however. Caspian Strategy Institute analyst Mubariz Hasanov told Anadolu Agency (AA), that a single country cannot have much effect on oil prices.
“The U.S. and Saudi Arabia alone do not have the power to seriously affect oil prices”, Hasanov insisted. “No country has this kind of power, unless it starts a war or executes a strong embargo, as was done in 1973.”
All other efforts could only have a limited and temporary effect on oil prices, Hasanov said, "If the price of oil is going to fall by 5 percent for economic reasons, political efforts to decrease it can only make it 5.5 percent, not 10 percent.”