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While oil and gas supplies have yet to be significantly affected by the current spat surrounding Qatar, it could escalate tensions in the region, home to a majority of the world’s oil reserves, and lead to deeper geopolitical instability.
In the aftermath of the 2014 price fall, producer countries have had to reevaluate policy and economic strategy while contending with a persistent glut that may dampen prices for some time, further undermine their budgets, and possibly cause domestic strife.
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.
Petchem growth appears guaranteed for the coming decades with demand rising faster than GDP in non-OECD countries and limited substitutes in this area.
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.
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.