The glut of crude oil continued to sink prices lower this week. Saudi Arabia and Iran, as expected, told the Organization of Petroleum Exporting Countries they would continue high levels of output, despite an attempt by the group to restrict the total output target to 30 million barrels per day.
Oil prices have declined sharply, due to multiple new supply sources, such as shale oil in the northern US and tar sands oil from Alberta, Canada. Russia, currently facing a financial crisis, must also continue pumping petroleum in order to pay their bills. The breakeven point for producing oil in the United States is anywhere from $39 per barrel to $65 per barrel, whereas Saudi Arabia can pump oil profitably down to $7 per barrel. On Friday morning, the price of "black gold" for delivery in July per barrel was $57.75.
Will Greece Default?
Financial markets remain nervous as Greece continued to delay making a 300 million euro payment to the International Monetary Fund (IMF). Instead, Greece decided to bundle together four payments totaling 1.62 billion euros due on June 30th. The most difficult issue facing Greek officials is continuing to pay pension obligations. The Greek drama continued all week as the IMF and the European Central Bank pressed Greece to comply with required austerity measures and pay back bail-out loans or face the alternative - being ejected from using the Euro currency. As of Friday, one euro currency was worth $1.11 US dollar.
FDA Rules on Antibiotics
On Tuesday, the United States Department of Agriculture ruled on the Veterinary Feed Directive, which will require veterinarians to supervise and provide prescriptions for the use of any antibiotics added to animal feed. The directive contains an outline of situations when antibiotics can be used in animal feed. Although the use of pharmaceuticals to promote animal growth has been declining recently, there are still concerns that overuse in livestock and poultry production is leading to a surge in antibiotic resistant bacteria. The cost of livestock production will probably increase as the new rules will become effective in December 2016.