Saudi Arabia's surprise decision last week to cut oil prices signals the beginning of a price war within OPEC, according to
The Wall Street Journal.
November West Texas Intermediate crude contracts settled at $89.74 a barrel Friday on the New York Mercantile Exchange, the lowest settlement since April 2013.
"If members don’t cooperate, which is likely, everyone is in trouble, and prices will drop even further," one OPEC official told The Journal.
The recent spike in military conflicts throughout the Middle East has riven traditional alliances among important OPEC members, the paper notes, contributing to the growth's discord. So is sluggish global oil demand and bountiful oil supply.
U.S. production is near its highest level since 1986, thanks to the shale revolution.
The dollar's strength—it rose to a six-year high against the yen and a two-year peak against the euro last week—also is depressing oil, as the commodity is priced in dollars.
"You are seeing pretty good growth in oil supply and that’s weighing on the market," Greg Sharenow, a commodity fund manager at Pimco, told Bloomberg. "You have the strengthening dollar. And this has been a big part of how it’s been trading recently."
WTI crude may drop to $85, Tom Finlon, director of Energy Analytics Group told the news service. "U.S. production is going to continue to increase."
Fadel Gheit, Oppenheimer senior energy analyst, told CNBC, "It's both supply and demand. It's basically the perfect storm that brought oil prices down."
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