Will the OPEC reduce the supply of crude oil? OPEC ministers will meet this weekend to discuss the possibility of cutting their oil supply, due to the current economic turmoil and slower demand. Owing to that the price of crude oil remain at USD55/barrel.
Why would OPEC need to cut the supply? The real cost of crude oil is in the region of USD30/barrel, but due to several national and technical issues, several countries incurred higher cost that may reached as high as USD50 to USD55/barrel. This are putting a burden to these oil producing countries especially those from the Latin and from African continent.
The last few years several oil producing countries are expanding their drilling and services to keep with growing demand at the time and therefore had to spend large amount of money on new infrastructure.
Therefore OPEC need to safeguard their own investment and to maintain the price of Oil certain level to ensure their survival.
And traders will be happy to see the fluctuation as an opportunity to trade on the current situation; buying at USD50 and sells above USD55.
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