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As of this morning the price of West Texas Intermediate (WTI) crude oil has fallen below $47 per barrel—down more than 50 percent since this summer. In an interview with Fox Business anchor Maria Bartiromo Saudi billionaire businessman Prince Alwaleed bin Talal said:
Q: Can you explain Saudi Arabia's strategy in terms of not cutting oil production? A: Saudi Arabia and all of the countries were caught off guard. No one anticipated it was going to happen. Anyone who says they anticipated this 50% drop (in price) is not saying the truth. Because the minister of oil in Saudi Arabia just in July publicly said $100 is a good price for consumers and producers. And less than six months later, the price of oil collapses 50%. Having said that, the decision to not reduce production was prudent, smart and shrewd. Because had Saudi Arabia cut its production by 1 or 2 million barrels, that 1 or 2 million would have been produced by others. Which means Saudi Arabia would have had two negatives, less oil produced, and lower prices. So, at least you got slammed and slapped on the face from one angle, which is the reduction of the price of oil, but not the reduction of production. Q: Will prices continue to fall? A: If supply stays where it is, and demand remains weak, you better believe it is gonna go down more. But if some supply is taken off the market, and there's some growth in demand, prices may go up. But I'm sure we're never going to see $100 anymore. I said a year ago, the price of oil above $100 is artificial. It's not correct.
NYMEX
The analysts at the investment bank Goldman Sachs now predict:
West Texas Intermediate, the U.S. marker crude, will trade at $41 a barrel and global benchmark Brent at $42 in three months, the bank said. It had previously forecast WTI at $70 and Brent at $80 for the first quarter.
Recall that Goldman Sachs warned back in 2008 of the possibility of a "super-spike" in the price of of oil that would exceed $200 per barrel. That did not happen.
As I have noted before: When contemplating the future of oil prices, one should always keep in mind U.S. foreign service officer James Akins' observation, "Oil experts, economists, and government officials who have attempted in recent years to predict the future demand and the prices of oil have had only marginally better success than those who foretell the advent of earthquakes or the second coming of the Messiah." Akins wrote that in 1973.
For more background, see my recent article, "How Low Can Oil Prices Go?"
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