OPEC leaves dollar, output questions dangling

[Lucas Corso]

OPEC leaves dollar, output questions dangling

9 hours ago
RIYADH (AFP) — OPEC leaders ended their summit clearly divided on key issues, leaving open questions about the use of the waning dollar for oil trading and the cartel's willingness to increase production.
A final declaration from the newly enlarged 13-member oil exporters' group on Sunday pledged reliable supplies, urged world peace to help stabilise prices and included a commitment to help fight global warming.
Saudi moderation prevailed over a bid by OPEC's anti-US bloc to make the group more political and there was no return to the "revolutionary" days of the 1970s that Venezuelan President Hugo Chavez spoke wistfully about in his opening address.
"OPEC shouldn't be used as a political organisation," Saudi Foreign Minister Prince Saud al-Faisal said at a closing press conference. "Oil should be a tool for development and not a tool for conflicts."
In the run-up to the two-day summit, the Organisation of Petroleum Exporting Countries -- which supplies 40 percent of world oil -- had been under pressure to increase supplies to help cool record prices of nearly 100 dollars a barrel.
Although some ministers expressed concern that expensive crude would eventually dampen demand for oil, they said blame for the near triple-figure price lay outside the cartel and turned a deaf ear to the demands.
Oil ministers will meet next month in Abu Dhabi to discuss the cartel's output policy, with any breach of the 100-dollar level in between times likely to heap pressure on the group to act.
OPEC last decided to raise output in September when they agreed to provide an extra 500,000 barrels a day to the market, effective November 1.
During the summit, the falling dollar, which is used by oil exporters to price and sell their crude, was at the centre of a clash between Iran, backed by Venezuela and new leftist member Ecuador, and key US ally Saudi Arabia.
"The dollar is falling, all heads of state were upset today because of the dollar. The value of their (financial) reserves has dropped," Iranian President Mahmoud Ahmadinejad said in an attack on the "worthless" US unit.
"All leaders taking part in the meeting were willing to convert the pricing of oil into a currency other than the dollar," he said.
The slide in the dollar, which has lost 15 percent of its value against the euro in the last 12 months, has hit the exporters, which rely heavily on ther oil and gas industries.
As a final compromise, leaders agreed that oil and finance ministers from the group would look at pricing oil with a basket of currencies, which would reduce volatility of prices but would further weaken the US currency.
"By changing the pricing structure, you are really talking about revolutionising the economies of these dollar-based economies," commented Yasser Elguindi, oil analyst at US-based financial services group SIG.
Dependence on the US currency also has clear political significance for the anti-US bloc, as well as Ecuador, which wants to abandon the greenback.
"The day will arrive not only in OPEC, but also in Latin America, when we will be liberated from the dollar," Chavez said on Sunday.
OPEC leaders had met only twice together before, in 2000 in Caracas and 1975 in Algiers.
On financial markets, the dollar fell 0.16 percent to 1.4641 against the euro on Monday, while New York benchmark oil prices rose 73 cents to 94.57 dollars and London's Brent contract added 72 cents to 92.34.
"The USD (dollar) was not helped by a discussion at the OPEC meeting over the weekend spurred by Iran and Venezuela about whether OPEC should stop pricing in USDs," said an analyst at investment bank Calyon, Mikul Kotecha.
In the final moments of the summit, the Iranian nuclear standoff cast a pall over the message of dependability contained in the joint declaration from the oil exporters' group.
Ahmadinejad alluded to the possibility of Iran suspending its oil exports if the US "took action" against the country.
"We would never want to use oil as a weapon or take any illegal actions... but if America takes any action against us we will know how to reply," he told a press conference.
Fear that a US attack could lead the Islamic republic to cease its exports or block key shipping channels for oil tankers in the Straits of Hormuz has driven prices higher in recent years.
Tension over Iran's disputed nuclear programme, which Washington claims is intended to produce a nuclear weapon, have raised the spectre of a US attack against Tehran.
The United States is also pushing for a third round of UN sanctions against OPEC's second-biggest exporter.



Source: AFP: OPEC leaves dollar, output questions dangling

[Lagun]

Won´t USD decline be in fact, the decline of all "western" currencies?

Although European fever for consumption is not in US levels, I believe the USD decline a first step in the decline of Euro, Sterling...

The most evident signal of the power traslation to the East!!!

[bombadillo]

Originally Posted by Lagun

Won´t USD decline be in fact, the decline of all "western" currencies?

No. The EC produces a trade surplus (modest, I think, but a surplus nonetheless). Ultimately what has been driving the dollar down has been the United States' sustained trade deficits. In a nutshell, the USD has been living beyond its means for decades, and financing its consumption by giving foreigners pieces of paper (dollar currency or US Treasury debt). Europe maintains its house better than the US.

[Lucas Corso]

Originally Posted by bombadillo

No. The EC produces a trade surplus (modest, I think, but a surplus nonetheless). Ultimately what has been driving the dollar down has been the United States' sustained trade deficits. In a nutshell, the USD has been living beyond its means for decades, and financing its consumption by giving foreigners pieces of paper (dollar currency or US Treasury debt). Europe maintains its house better than the US.

In fact, it's the huge inbalance in the US trade that drives Dollar low not only towards Euro but also Pound, Canadian and Australian dollar...
However major part of US treasury bonds are held by Central bank of China: in a way China buy dollars so the americans can buy cheap chinese products, european economy is nearly decoupled form the american one: only 7% of the euro-zone trade volume goes on the US...

[Lagun]

Originally Posted by bombadillo

No. The EC produces a trade surplus (modest, I think, but a surplus nonetheless). Ultimately what has been driving the dollar down has been the United States' sustained trade deficits. In a nutshell, the USD has been living beyond its means for decades, and financing its consumption by giving foreigners pieces of paper (dollar currency or US Treasury debt). Europe maintains its house better than the US.

Thats exactly the case of the UK.


Furthermore, the Eurozone itself has passed form wide surplusses to balanced situation, so I believe next step is Euros collapse after USD.

[bombadillo]

Originally Posted by Lagun

Thats exactly the case of the UK.

That is the case of the UK. At some point it will have to pay the price.

Furthermore, the Eurozone itself has passed form wide surpluses to balanced situation, so I believe next step is Euros collapse after USD.

Take a look at: Euro zone reports trade surplus of 4.6 bln euros in July

Countries like Germany remain exporting powerhouses, despite euro strength. Germany provides the real muscle behind the EU, and its economic strength ultimately underpins the euro.

I'm pessimistic about Europe for other reasons -- demographics, an unaccountable EU bureaucracy, and slowly declining competitiveness. But every place in the world has its own problems.

[Lagun]

I believe you should take all the exterior balance as a whole, that means: including services and capital balances.

After doing that, I believe the Eurozone is day after day in redder numbers.

As you said Germany is saving the situation, but it will not last long. The trend is that power is day after day moving to the East.

[Franze]

Originally Posted by Lagun

I believe you should take all the exterior balance as a whole, that means: including services and capital balances.

After doing that, I believe the Eurozone is day after day in redder numbers.

As you said Germany is saving the situation, but it will not last long. The trend is that power is day after day moving to the East.

Sadly, it seems that, without a political and economical revolution, our protagonism is over!