Oil continues to fall

US, WASHINGTON (ORDO NEWS) — The price of oil continue to fall and find their lowest known in 2002 for WTI (around $ 20) and 2003 (around 25 dollars) for Brent.

Going below 20 dollars, prices would return to levels seen for almost 40 years. This stressful situation is explained by an absolutely new imbalance, that of the combination of shocks affecting both supply (excess) and demand (wiped out).

The diplomatic “cold freeze” between Saudi Arabia and Russia continues to drive oil prices down. With a price per barrel of around 20/25 dollars, this situation is likely to become problematic for countries which depend very largely on oil price levels but also for many emerging countries.

Russia and Saudi Arabia can manage this context for a short time due to their large financial reserves (around 600 and 500 billion dollars respectively). The additional advantage of Russia is based on its floating currency which allows it to recover on the ruble part of what it loses on the price of oil.

But some other OPEC countries, notably Algeria or Angola, may find it much more difficult to manage the situation and the budget cuts they will have to make will potentially generate popular uprisings.


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