Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Potential Highs and Lows For Gold In 2020 - 5th Jun 20
Tying Gold Miners and USD Signals for What Comes Next - 5th Jun 20
Rigged Markets - Central Bank Hypnosis - 5th Jun 20
Gold’s role in the Greater Depression of 2020 - 5th Jun 20
UK Coronavirus Catastrophe Trend Analysis Video - 5th Jun 20
Why Land Rover Discovery Sport SAT NAV is Crap, Use Google Maps Instead - 5th Jun 20
Stock Market Election Year Cycles – What to Expect? - 4th Jun 20
Why Solar Stocks Are Rallying Against All Odds - 4th Jun 20
East Asia Will Be a Post-Pandemic Success - 4th Jun 20
Comparing Bitcoin to Other Market Sectors – Risk vs. Value - 4th Jun 20
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Can Oil Markets Survive An OPEC Implosion?

Commodities / Crude Oil Nov 02, 2016 - 12:56 PM GMT

By: OilPrice_Com

Commodities

A technical meeting that was supposed to iron out some wrinkles for a deal to cut oil production ended in acrimony over the weekend, and OPEC's effort at coordination could be at yet another impasse.

Following the Algiers agreement at the end of September, a tentative deal that called for a collective reduction in oil output in the range of 200,000 to 700,000 barrels per day, OPEC scheduled a meeting on October 28-29 in Vienna to put some meat on the bones of the pact so that it could be officially sealed at the end of November.


But after weeks of papering over differences between its members and trying to put some positive spin on the prospects for a deal, OPEC not only failed to agree on individual production quotas, but its members also bickered over data and even which countries are supposed to participate. The group spent two days negotiating, and came away with nothing more than a statement that said they would continue talking.

The biggest hang up at this point is Iraq, which has two fundamental complaints. First, Iraqi officials dispute the data being used to calculate its oil production levels, arguing that the sources OPEC is using for its official estimates are underestimating Iraq's output. That would hamstring Iraq more than it feels is fair, forcing it to cut deeper under the deal.

More importantly, Iraq is demanding an exemption from the deal entirely, arguing that it should be allowed to produce as much as possible because of its costly war against the Islamic State. Iran, Nigeria and Libya have been granted exemptions, due to the effect of sanctions (Iran) and disrupted supply because of security issues (Nigeria and Libya) – Iraq wants the same treatment.

That resulted in some friction at the Oct. 28 gathering in Vienna, a meeting that reportedly stretched on for 12 hours. As the WSJ notes, the success of this type of agreement at the end of November tends to require a consensus from lower-level officials ahead of time, something that did not occur this past weekend. That casts some serious doubt on the viability of the overall deal. On Oct. 29, another meeting with non-OPEC producers such as Brazil, Russia, Azerbaijan, Mexico, Oman and Kazakhstan, also ended with very little progress and zero commitments. Moreover, non-OPEC countries will have little impetus to offer any concessions if OPEC itself cannot come to terms. Russia said upfront that it would not cut its production, and it would only freeze if OPEC agreed to cut first.

The challenges standing in the way of the deal were evident right after the Algiers announcement at the end of September. Getting all members on board for a production cut was always going to be an uphill battle. But after this weekend, the odds of a deal look increasingly grim. "It's more likely that OPEC will come away with no decision in November than that they'll reach an agreement," Fabio Scacciavillani, chief economist at the Oman Investment Fund, told Bloomberg on Oct 30. "If they are able to agree, it will likely be a wishy-washy deal that's hobbled by too many exemptions."

With competing interests, the discord seen over the weekend in Vienna was somewhat predictable. And the results of the fallout are predictable too: oil prices dropped more than 1 percent on Monday during early trading, with both WTI and Brent dipping below $50 per barrel and dropping close to one-month lows. Hedge funds and other money managers cut their long positions on oil futures and increased short bets for the week ending on October 25, a sign that the markets are losing confidence in a deal. "The price balloon is deflating in response to increasing doubts that OPEC will deliver a credible agreement on production control,” David Hufton, CEO of brokers PVM Group, told Bloomberg. "The combined OPEC and non-OPEC dance rhythm is one step forward followed by two steps back.”

In fact, the chances of a deal might deteriorate even further in the remaining days before the official meeting at the end of November. OPEC likely increased oil production in October, which would require even steeper cuts than they previously laid out. That could put a deal of any significance entirely out of reach.

By Nick Cunningham of Oilprice.com

Link to original article: http://oilprice.com/Energy/Oil-Prices/Can-Oil-Markets-Survive-An-OPEC-Implosion.html

© 2016 Copyright OilPrice.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules