By paNOW Staff

Analyst says Saudis driving low oil prices

Dec 16, 2014 | 11:07 AM

A Canadian petroleum analyst says it’s going to be up to Saudi Arabia to decide how low the price of oil is allowed to slide.

In an appearance on the Brent Loucks Show, Roger McKnight, chief petroleum analyst with En-Pro International, said cratering prices are squarely the result of Saudi policies.

“It looks like the Saudis are pretty ticked off at North American oil production. So it looks like they’re going at it by just undercutting the price and just flooding the market. This can go as long as they can keep on doing this.”

The Saudis sit at the forefront of the Organization of Petroleum Exporting Countries (OPEC) and have signalled that they are unwilling to cut production to boost prices.

The oil minister for fellow OPEC member the United Arab Emirates has been quoted saying the cartel would be comfortable with prices as low as $40-a-barrel.

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“It’s no problem  for them — it costs them $10 a barrel to get it out of the ground,” said McKnight, pointing out that letting the price tank is a move that will eventually force higher-cost producers, like the U.S. and Canada, to shut down rigs.

But, McKnight said the price slide can’t continue indefinitely, while the Saudis can weather low prices for quite a while, other OPEC countries like Venezuela can’t.

“I don’t think OPEC is a very cohesive group. I think there are members in that group that really can’t handle this financially.  We’re looking at $54 for West Texas Intermediate, which is absolutely ridiculous. They can’t survive on that. The Saudis can, but the rest of them can’t,” he said.

McKnight said he expected prices to come back up to around $75 to $80-a-barrel by August.

Oil was trading below $60-a-barrel on Tuesday.  That’s down from as high as $115 in June.

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