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28 Nov, 2014 20:58

Brent crude drops below $70 for first time in 4 yrs, ruble in new historic plunge

Brent crude drops below $70 for first time in 4 yrs, ruble in new historic plunge

Brent crude oil slumped to below $70 on Friday, its lowest level since 2010, after OPEC decided not to cut oil production. Venezuela's Foreign Minister said the group had worse cases to handle, adding that the current slump has partly political grounds.

The price of the crude oil dipped 3.7 percent on Friday and fell to $69.94 per barrel, according to auction results. The cost of January futures fell by 4.47 percent, to $66.07 per barrel.

In turn, the ruble hit new lows against the dollar, going down to $50.01 on Friday night at the close of the Moscow Stock Exchange.

This follows the decision made by the 12 members of the Organization of the Petroleum Exporting Countries (OPEC) on Thursday, to keep daily oil output at 30 million barrels. The step was taken despite a major oversupply that has caused oil prices to fall more than 30 percent.

Crude oil at $66. This is getting interesting...

— Rick Falkvinge (@Falkvinge) November 29, 2014

RT Spanish spoke with Venezuela’s Foreign Minister Rafael Ramírez and asked him to comment on the developments. Venezuela is one of the worst hit countries in the current oil price slump.

“OPEC is a mature organization that has already faced different situations, perhaps even more complex than this one. Today we had a fairly long discussion of all factors that influenced that market and on the basis of a general consensus we’ve made a decision, which is the first step towards the stabilization of the market,” Ramírez told RT.

He reminded that 30 million barrels per day has been the OPEC’s oil production ceiling since December 2011.

Venezuelan Foreign minister Rafael Ramirez (AFP Photo)

“But now we have an overproduction, which, according to rough estimates, is 1.5 million barrels,” he said, adding that the Thursday decision will move the overproduction from the market, and the 12 members will monitor the market’s reaction.

READ MORE: Oil slumps 4% as OPEC leaves output unchanged

“The market situation is difficult,” Ramírez elaborated. “The demand for raw materials is kept at a low level, especially amid the economic crisis in Europe and the United States…At the same time, production is constantly increasing, especially due to shale [oil production] in the US.”

“Combined with geopolitics, as well as the desire to impose sanctions on Russia, and sanctions against Iran – all that influenced the fact that oil prices have fallen,” he said.

Ramírez stressed the importance of following the unilaterally taken Thursday decision. He said the price, which has been at $100 per barrel for quite a long time, has shown that it is a “fair price for both producers and consumers.”

A general view shows the166th ordinary meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria on November 27, 2014. (AFP Photo)

At lower values, players with higher production price will leave the market, as well as new projects, and developing ones will be closed, he explained, adding that the countries-producers will need more funds to increase the capacity to cover the needs of the market.

Ramírez warned those putting stakes on speculation, saying that OPEC has tools to predict the market’s behavior.

The foreign minister stressed the importance of cooperating with non-OPEC member countries. He reminded of the Tuesday meeting held between Russia, Saudi Arabia, Mexico, and Venezuela, which was held in such a format for the first time in 11 years.

“Such meetings are very important because besides the fact that we share our opinions, we preserve the mechanisms of cooperation and together observe how the market reacts to them.”

READ MORE: Venezuelan president resolved to return oil to $100 a barrel

In 2008, OPEC had to face a sharp fall of oil prices, which slumped from $140 per barrel to as low as $35 in six months. According to Ramírez, it took a whole year for prices to recover that time, after OPEC decided to cut oil production.