The Cut of the Price of Crude Oil by Saudi Arabia - Research Paper Example

On Wednesday, the oil prices per barrel slumped to the lowest value in a year’s time after it emerged that Saudi Arabia had brought down its official oil price for each barrel of crude oil produced.  Some of the investors in the oil industry have predicted that the members of the Oil producing and exporting countries (OPEC) will be forced to reduce the amount of crude oil they are producing so as to maintain the price of each barrel above USD 100. This will ensure that their economic status is not shaken by this move.

According to John Kilduff who is a founding partner of Again Capital in the City of New York, this move is an indication that Saudi is keener on maintaining the market share in an environment that has lower prices than on maintaining high prices in a uniformly competitive market. The results of this move remain unpredictable. During the period when the United States shale drilling boom was at its peak, guar which is a legume used as a key ingredient in the rock shattering hydraulic process was in very high demand.

As the prices of guar rose, the investors in this industry were able to take notice and hence the necessary action was taken to make the industry more sustainable. However, the actions taken by the investors did not result in the expected results. The price of crude oil went below USD 90 on Thursday for the first time since April 2013 after the news that Saudi Arabia would be cutting its selling price.