Tricks of the trade Jillian Ambrose

“This all but guarantees that heavy losses will continue”

Why would one of the world’s largest producers of crude oil opt to watch the price of its most valued commodity plummet?

This is the question commentators have scrambled to answer in the days following Opec’s decision to maintain global oil production levels where they are: well above flagging demand. This all but guarantees that the heavy losses sustained since the summer will continue, with some suggesting a floor of around $60/barrel in 2015.

Although the link between gas and oil prices is nowhere near as strong as it once was, the fallout of the Brent crash has rippled out through the energy complex, resulting in not insubstantial losses for gas and coal. And for what?

Opec kingpin, Saudi Arabia’s Ali Al-Naimi, seems happy enough to watch prices tumble, backing calls for production to hold so that the market can restore “equilibrium”. To many, this can be loosely translated as “nipping the US shale oil revolution in the bud”. Why curtail supply and leave the door open for a newcomer when you can maintain market dominance?

But the other interesting consequence of the five-year lows seen on Brent is a five-year low for the Russian rouble. The country’s political and economic clout is intrinsically linked to its energy resources – a point made clear this year as sabre-rattling over European gas supply muddied the waters of the Ukraine crisis.

With Russia now on its knees, perhaps the crude crash isn’t such a terrible outcome for the US after all.