News Friday morning that OPEC will not be reducing their overall production targets of 30 million barrels caused the price of oil to drop in trading. That was met with trepidation by many in southeast Saskatchewan, since the price had begun to slowly climb out of a previous low point caused by the supply glut.
Golden West business commentator Paul Martin said the decision by OPEC has more to do with dealing with competition than working to make a profit. "I think what the middle Easterners are saying is we got a new competitor on the block, and we're going to break them," he explained.
With Canada as a net exporter of oil, there has been a slight cushion to the price, especially for companies like Crescent Point Energy that have been hedging the price on the forward markets, Martin explained. The drop in oil has also led to a drop in the value of the Canadian dollar compared to the American dollar. For oil exporters, as well as a number of other industries that are reliant on export for their bottom line, such as agricultutre and manufacturing, they have been able to weather the storm fairly well.
Even with the downturn in the price, and a number of companies slowing down operations while the price is low, many are optimistic that as it has in the past, the price of oil will beging to climb back up. Martin said that OPEC nations may begin to feel internal pressures to take action to increase the price of oil as they tap into financial reserves. When that happens, we could see the price of oil once again move up, instead of down.