Oil prices fell under $55 per barrel after Saudi Arabia refused to cut output unless other producers outside OPEC did so too. As Grace Pascoe reports it looks like prices could remain low for a while.
ATTN CLIENTS - PLS USE THIS VERSION - SOUND PROBLEM CORRECTED Motorists have been enjoying cheaper fuel for months now. And with Saudi Arabia again refusing to cut its oil output - low pump prices may be here to stay. At the weekend the key OPEC member said it wouldn't prop up the oil price unless other producers did the same. Jane Foley is from Rabobank. SOUNDBITE (ENGLISH) RABOBANK, SENIOR FX STRATEGIST, JANE FOLEY, SAYING: "Saudi wants to grab back some its market share and that of course has been given away in recent years as the oil price of course was relatively high. Many people concluded that supply would drop back in many oil producers and this of course hasn't happened. One of the reasons for this is that once rigs are up, once they've been invested, and been developed it can be quite costly to mothball them, to take them out of production." A boom in shale exploration in the U.S. and Russia has caused production levels to soar. But Saudi Arabia hopes by maintaining its crude oil output at 10 million barrels a day it can force some of the newcomers out of the market longer term. SOUNDBITE (ENGLISH) RABOBANK, SENIOR FX STRATEGIST, JANE FOLEY, SAYING: "It does seem likely that relatively low oil prices can persist for a while. On the other hand if Saudi is successful in squeezing out investment then it seems quite obvious that some point in the future then prices will again rise." Brent crude slipped to $55 per barrel following Saudi's decision. And oil companies may have to further cut spending to save cash and survive the downturn.