As the group doubles down on its production cut, questions linger about exit strategy, capability, and size.
Likely with window dressing.
More and more market watchers are making the case that OPEC should just leave well enough alone and let the free market set the price. While trying to influence sentiment and fundamentals, on nearly a daily basis, OPEC has already destabilized the market and guarantees more uncertainty ahead.
Iranian oil output has come a long way since the nuclear deal went into effect and tough sanctions were lifted in January 2016, but the outlook now very much depends on the outcome of the May 19 presidential election.
Venezuela’s current state of affairs is a prime example of why it’s important for economies of both producers and consumers to reduce dependence on oil. The meltdown in Caracas is a precarious situation for the U.S., given that Venezuela is its number three crude oil supplier.
Experts disagree on the potential oil market impact from Saudi Aramco's IPO. Some argue that the Kingdom will choose a pump-at-will policy to please shareholders, while others see continued coordination with OPEC.
Markets are shrugging off OPEC headlines, with prices weakening and hedge funds liquidating long positions. The cartel may be missing the mark on its stated longer-term goal of stabilizing the market and preventing a catastrophic correction.
In combination with robust U.S. shale oil production, the wild cards of Libya, Nigeria, and Iraq could force OPEC and its allies to go back to the drawing board.
A recent study [indicates that] for every million barrels of oil taken off the market, the world oil price will rise by about $5 per barrel, given a baseline oil price of around $60 per barrel. This suggests…a large-scale disruption in Saudi Arabia could cause an upswing of 50 percent or more, and that a catastrophic regional disruption could result in the doubling of oil prices.” A 100 percent increase in oil prices could reduce U.S. GDP by around 5 percent.
Despite constant chatter of rebalancing, oil prices have been weakening, and OPEC has itself to blame for causing market uncertainty and instability.