OPEC did what it was expected of them so, no surprise there and hence, we have not seen that much of steep drop for oil. The bigger question is about the threat which the organisation is facing now, because the probabilities are skewed that its members will start doing what they think it is best for them and as a result we could see the price war becoming even more intense. In the absence of demand that is not such a good news, especially when buyers know that environment is their favour and all they need to do is to kick back and let the price come to them.
For OPEC, It is not about maintaining their profit for the time being. The most important elements are maintaining the market share and even more significant is keeping the united front. Hence they are going to increase the production. Let’s not forget we have new members coming in OPEC and iRan ready to pump more and given that the current quota is already not working- new members will be very displeased if they would have reduced the over all number.
The Saudis are not abiding by their rules and other members have started to follow. Iraq is very ambitious and increasing its output aggressively. In summary there is more supply to come and perhaps that will damage the non shale production.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam