Here are some excerpts from an article about the OPEC agreement.
So far, the OPEC agreement has pushed up the price
of a barrel of West Texas Intermediate - the national
benchmark for oil prices. In just two weeks, it has
gone from $12 to $15. That price may rise further
once the cuts take effect, and once the world market
becomes convinced that oil producers are serious
about complying with the agreement.
"This is a big cut, and if it doesn't unravel, this
would be a total paradigm shift in market dynamics,"
says Sarah Emerson, senior energy analyst at Energy
Security Analysis Inc. in Boston. "I see $17 or $18 a
barrel for West Texas Intermediate in the
May-June-July time frame."
(snip)
Few experts want to guess at how long the OPEC
agreement will last. After all, in the oil business,
cheaters do prosper.
"Any OPEC agreement will be the victim of its own
success," says Mr. Beranek of Petroleum Finance
Company. In the past, OPEC agreements unraveled
when countries became tempted to take advantage of
higher prices by increasing production.
But by asking for 2 million barrels in cuts, when
only 1.5 million in cuts were needed to make up for
shrinking Asian demand, OPEC may have planned
for some wiggle room.
"They had a problem, but it wasn't this big of a
problem," says Ms. Emerson of Energy Security
Analysis. "They're taking a sledgehammer to an ant."
csmonitor.com;
Analysts are saying that the expected 75% compliance with the agreement will still be good for prices.
Charles |
