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OPEC mulls move to euro for pricing crude oil

Boss Hog

TRIBE Member
OPEC mulls move to euro for pricing crude oil

By PATRICK BRETHOUR
Globe and Mail Update

Calgary — OPEC is considering a move away from using the U.S. dollar — and to the euro — to set its price targets for crude oil, the highest-profile manifestation of the debilitating effect of depreciation on the greenback's standing as the currency of international commerce.

Several members of the Organization of Petroleum Exporting Countries are seeking formal talks on using the euro, as well as the U.S. dollar, when determining price targets for crude, a senior oil minister within the cartel said Monday. “There are countries that are proposing this,” Venezuela's Oil Minister Rafael Ramirez said in Caracas. “It's out there, under discussion.”

Mr. Ramirez did not specify which OPEC members are pushing the proposal, but much of the impetus is believed to come from Persian Gulf producers.

They have seen their purchasing power in Europe pinched as the U.S. dollar loses ground against the euro — including touching a record low Monday.

Any move to water down the use of the U.S. dollar as the currency would have enormous symbolic impact, said one prominent Canadian energy analyst.

“On a symbolic level, I think it's huge, not only for what it says about the U.S. dollar, but also the implied change to the nature of energy trading worldwide in the future,” said Wilf Gobert, vice-chairman of Peters & Co. Ltd.

Beyond the blow to the greenback's prestige, a move by OPEC to even partly price in euros would ensure that any further depreciation in the U.S. dollar boosts oil prices, Mr. Gobert said. And any country — not just the United States — using the U.S. dollar for pricing would see the cost of the commodity rise as that currency fell.

Indeed, while OPEC has yet to make any formal break with the U.S. dollar, its refusal to boost output has already offloaded much of the cost of the dollar's depreciation on to the American economy. Mr. Gobert said oil prices at the end of last month, about $32 (U.S.) a barrel, would have been much lower if not for the decline in the value of the U.S. dollar over the past 24 months. Using the exchange rates of the dollar versus the euro two years ago, crude would be selling for $22 a barrel instead, he said.

All of the oil prices used in OPEC's benchmark index, or basket, are currently denominated in U.S. dollars.

The cartel uses that index as the basis of its price-band policy, whose stated intent is to adjust output so the basket hovers within a $22-to-$28 range.

Oil prices have lingered well above that maximum for 26 consecutive trading sessions, which in theory means that OPEC should have increased its output by 500,000 barrels a day to lower prices. But the cartel has ruled out doing so before its regularly scheduled meeting on Feb. 10, arguing that it is the depreciation of the U.S. currency — not a lack of supply — that is fuelling the rally in crude prices. Monday, crude for February delivery rose 41 cents to $34.72 a barrel on the New York Mercantile Exchange, a 10-month high.

Mr. Gobert said he believes it is unlikely that OPEC will opt for a formal split with the dollar, although the cartel may very well accomplish the same effect by raising its price band, he added.

But he said that OPEC's musings about adopting the euro are part of the increased chatter about the rising value — and influence — of the five-year-old currency among commodity traders and analysts


http://www.globeandmail.com/servlet/story/RTGAM.20040112.wopec0112/BNStory/Business/
 

Vote Quimby

TRIBE Member
Interesting. But somewhat shortsighted.

A move to the Euro looks appealing now, but what about a year from now? 2 years? 5 or 10? The Euro is strong now, but it won't last.

The Euro needs a strong European economy and a weak US economy to sustain the level it is at. The reality is that it will not be like this forever. For starters, 10 new countries are about to join the EU. France and Germany are running huge deficits, large enough that the EU scrapped the Growth and Stability pact that meant to cap deficits at 3% of GDP. The US economy is expanding once again. And once again it is outperforming that of the Euro area.

They may move to the Euro as if to thumb their noses at the US, but they may regret the decision later on when the US economy regains its strength.

But who knows? No one ever said people always make rational decisions when it comes to shit like this.
 

OTIS

TRIBE Member
Saddam made a shitload from moving his international oil currency from USD to the Euro but the US would never allow all of OPEC to do so.. it woud devalue their inflated currency so far it would start WW4. P.S. it's not only about potential value of currency, it's also stability. The US is not presentign themselves as the most stable nation on earth at the moment.. this has more than a few people concerned.. including the IMF.
 

~atp~

TRIBE Member
My brain doesn't understand this shit when 1000's of innocent children are dying each day from ignorance.


...and don't talk to me about cliches asshole, I'm drunk and not very nice. :)
 

Ditto Much

TRIBE Member
Originally posted by OTIS
Saddam made a shitload from moving his international oil currency from USD to the Euro but the US would never allow all of OPEC to do so.. it woud devalue their inflated currency so far it would start WW4. P.S. it's not only about potential value of currency, it's also stability. The US is not presentign themselves as the most stable nation on earth at the moment.. this has more than a few people concerned.. including the IMF.

drama queen!!!



For the rest.


Iraq is now part of the US oil system. Its now in a strong position to dictate what OPEC does or if OPEC even has a role in the near future. Let OPEC control the oil it only speeds up getting Iraq back online.

With Europe and Japan fedding off the remained the price isn't going to be any more stable.

If it was all about the oil now at least we can admit that they stole it.
 
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OTIS

TRIBE Member
hahaha.. yea, that's why they are still importing 90% of Iraq's oil from Kuwait.. dude, they have no pull unless they are actually pumping oil outta that country.. and as it seems, they don't even have civil control yet, so I don't expect them to have much else in order until that happens.
 
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