| | | Saudi Arabia Bluffs Oil Markets, Will It Last?
Oil prices have been trending upward, both global benchmark, London-traded Brent and U.S.-benchmark, NYMEX-traded West Texas Intermediate (WTI), just a little more than week after OPEC said it would agree to agree to cut production at its next meeting in November.
On Thursday, oil prices reached back in the $50s range for the first time since June, seemingly finding a much needed floor. On Friday, Brent dropped, but only marginally, down just 0.5% to $52.26 a barrel, while WTI crude settled down 63 cents at $49.81 amid profit taking, but still closed the week up 3.3%. Despite the drop, Brent and WTI remain up more than 10% since OPEC’s announcement last week.
The 14-nation oil exporting cartel, led by de facto leader Saudi Arabia, agreed on the sidelines of an energy forum in Algiers on September 28 to collectively cut oil production as much as 740,000 barrels per day (bpd), in an effort to prop up bearish oil prices which have dropped around 60% since mid-2014 on the back of a worldwide oil supply glut. It was the first such agreement in almost a decade.
But it won’t last. There are too many variables to consider which are out of OPEC’s control. First, OPEC now represents just 40% of global oil production and will need major non-OPEC producers to also agree to a production cut to have any real impact.
Will that happen? It’s anybody’s guess, but don’t count on it. Yet, OPEC, particularly Saudi Arabia, who is a master at spinning news for the global press that hangs on its every word want us to believe it will actually happen. |
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