What is the logic behind OPEC’s decision to not cut the supply even as the oil prices continued to fall?

There are 4 main reasons floating around for keeping up the supply or even increase, despite the drop in prices; this is a big move and unforeseen as Saudi like many other OPEC countries depends on >$100 oil prices to sustain its welfare scheme an fund its budget:

• Negate the shale oil effect to make it unprofitable for the US of A, as their import levels from OPEC has drastically dropped down over the last 3 years — the merger of Baker Hughes with Halliburton shows sentiments of consolidation in oil services; presume most of them are leveraged to fund expensive technology and drilling operations banking on the north of $100 crude price
• Stem the growth of Iraq and influence of Iran in the region — since Iraq has kickstarted production particularly South Basra oil as well as influx of Kurd oil, Saudi, as the largest OPEC producer must be ginger over this new development, as the Shia influence spreads over the region giving strong leverage to Iran, which is loggerheads with the Kingdom of Saudi Arabia over sectarian difference and other political factors — the drop in price also coincided with the Iraqi budget presentation that had programmed for higher oil price
• Drop in demand from East and increase in supply from Iraq, Libya — the growth projections of China has come down from last year, so is the demand from Japan, Taiwan and India has tapered
• Thwart the growth of ISIS — If Saudi govt. aligned with the US and NATO is mere speculation but the fact that ISIS was selling pilfered oil for about $1 million/day makes it a compelling reason to thwart their growth, profits of which goes to fund the terrorist operation!

The other speculation is to ostracise Putin Russia for the Ukraine aggression and unshackle Europe from its Gas cuffs!

Of course, all this is possible only because ARAMCO’s cost of production is less than $4 — making it viable to sustain the drop in margins! for how long more is the moot question??!

What is the logic behind OPEC’s decision to not cut the supply even as the oil prices continued to fall?

Originally published at vidshankar.wordpress.com on January 22, 2015.