OPEC Strategy Changing

Last Friday, “In Vienna OPEC wrong footed everyone by abandoning the quota limit for OPEC production.” In the past there was a correlation between OPEC's actual production and the declared limit. “Now the limit has gone missing.” To balance the market a cut of 1.5 million barrels per day is needed. Steve Brown, Oil Price analyst, explains the issues, “If every member was honest and really did cut production that would only require a 5 percent reduction in production and that could easily generate a 30 percent uplift in the oil price.” Six more months of low prices may “convince the serial cheaters (I'm looking at you Venezuela and Nigeria) and the less disciplined members of the group that when Saudi relents” and wants a new set of quotas, members may agree to change.