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KAI RYSSDAL: Given that there’s a hurricane on the way, you might say oil traders took it easy on us today. Crude bubbled up just 11 cents this afternoon at the close. A bit more than $106 a barrel as Hurricane Ike makes its way toward the Gulf of Mexico.
Bear that price in mind as you consider this: OPEC meets in Vienna tomorrow, and the other two sides of the price triangle are going to be on the agenda. That’d be supply and demand. Today a couple of cartel members said they think there’s too much oil on the market, pushing prices too low. From New York, Ashley Milne-Tyte reports.
ASHLEY MILNE-TYTE: Some OPEC members want to cut oil production and keep prices high. Juan Pablo Fuentes is an oil economist with Moody’s Economy.com. He says countries like Iran and Venezuela rely on the high price of oil.
Juan Pablo Fuentes: It’s a way for them to keep their political projects and keep the economy going, no? They will really face difficult economic times if oil prices fall below $90 or $100 even.
Still, the real decision lies with Saudi Arabia, says Stephen Leeb. He’s CEO of Leeb Capital Management. He says the Saudis will have to please the U.S. and their fellow cartel members.
Stephen Leeb: I think the way they’ll negotiate that line is to announce no cut but at the same time reduce the oil that they are pumping.
An unofficial cut, in other words. OPEC is supposed to pump a certain amount of oil per day. Right now it’s pumping about 600,000 barrels a day above that level. Leeb thinks OPEC will simply revert to its original quota. Still, he says, demand for oil has slackened to the point where prices could drop to $90 a barrel in the next few months. But that won’t last.
Leeb: We simply don’t have the means to increase commodity supplies, oil included, to the extent that the world needs.
He says in the future China and India will only get thirstier.
I’m Ashley Milne-Tyte for Marketplace.
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