Oil Price Crash Sparks OPEC's Revolt Against Saudi

The huge surplus of oil production has crashed oil price and sparks the revolt of OPEC against Saudi Arabia. Saudi's strategy to drive American oil producers out of competition has started to backfire.

It all began with U.S. shale oil revolution a few years ago. The technology to extract oil from unyielding shale rocks has given America a leading edge in oil production. U.S. shale oil is perhaps the most important invention of the 21st century. As result, American oil output skyrocketed and create the balance of power in the global energy. Saud Arabia, as leading OPEC producer, is determined to drive American out of the market, by increasing its oil production and flood the market. However, the strategy seems to fall apart, as OPEC members are revolting against Saudi.

According to CNN Money, smaller countries want OPEC to hit the brakes on production to help lift depressed oil prices. The plunge in oil prices is hurting less wealthy OPEC members like Algeria, Angola, Ecuador, Nigeria and Venezuela. Former central bank governor of Nigeria, Muhammad Sanusi II told CNN that Saudi strategy is a mistake, "It does not help them and it does not help anyone," he said.

The wider gap between wealthy oil producers and less affluent countries will destroy OPEC. Starting June last year, oil prices has stumbled 60% and chop OPEC revenue by almost $500 billion a year. Oil price has plunged from over $100 a barrel to $40 for US crude, and $44 for Brent in Europe.

Goldman Sachs predicted that oil price could even reach a lower price. As reported by The Telegraph, the US investment bank told its client that oil price could reach as low as $20 a barrel. This can happen as OPEC and Russia fought a fierce battle for market share in Europe and Asia. Recently, Saudi Arabia is shipping crude oil to Poland and Sweden, an act that can be seen as trespassing by the Russian.

Official news agency of Saudi Arabia on Monday reported that the country is willing to cooperate with all oil producing and exporting countries. However, recent devious acts by Saudi will not make Russia and other non-OPEC producers to agree to the terms easily.

Nevertheless, recent Reuters commodity report on Monday shows Brent oil price has been settled to $44.83 a barrel after Saudi declare its willingness to cooperate with other oil producing countries. Reuter also reminded of how Saudi and other big OPEC oil producers have failed to fulfill their pledge last year. Instead of cutting production, they ramped up output to fight for market share that cut oil price down to half.

Saudi Arabia seems to have no other option than following demand from other OPEC members. If the said country will not comply it could be the end of OPEC.