Saudi Arabia's crown prince warned yesterday that his kingdom would win an oil price war if fellow members of the Organization of Petroleum Exporting Countries violated the oil cartel's new pricing and production agreement.
In an apparent toughening of the Saudi stance, Crown Prince Abdullah told the Arab-language newspaper Al Siyassah in Kuwait that his country--OPEC's largest producer and pricing power--was prepared to slash its production to 1 million barrels a day to enforce the fragile accord.
He added that OPEC's decision to lower the price of oil by $5 a barrel will not seriously affect his country's economy. He said Saudi Arabia will cut spending slightly, but its vast financial reserves will absorb most of the impact of the expected $18 million a day drop in oil revenues.
In Zurich, the Union Bank of Switzerland predicted that spot oil prices would sink to between $20 and $22 a barrel by the end of this year despite OPEC's unprecedented decision to lower its base price to $29 a barrel.
"Although an open price war on the oil front will most likely be averted," Switzerland's largest bank said, it could be assumed that several OPEC mavericks would continue to defy the cartel's new price and production quotas.