Talk of oil production freezes and even production cuts have been tossed around so much lately among analysts, traders, pundits and major producers that it’s hard to keep up with who said what, and which comments to take seriously.
Against the backdrop of all of this conjecture is a more than two-year long global oil supply glut and price drop that has set the oil industry back on its heels. Lay-offs, bankruptcies and a general souring of the industry has become a “new normal,” but prices have done anything but find a “new normal.”
Down from $114 a barrel in the summer of 2014, prices are bouncing around the mid to upper $40s range, with little reason to think that they will find a floor – which brings us to OPEC de facto leader Saudi Arabia and Russia, the world’s top two oil producers.
Ahead of an informal meeting of producers later this month in Algiers, the two oil producing juggernauts agreed a few days ago to “agree” to do something about oil markets, possibly in hopes that rhetoric could help restore market equilibrium.
While headline grabbing announcements can indeed move markets, it’s always short lived, lasting usually a day or so, then the reality of the ongoing supply glut quandary kicks back in with corresponding pressure on prices.
As I pointed out in a post a few days ago, talk is cheap and what needs to happen is not more talk, or even a production cap at current levels, which are still at record highs for OPEC producers and Russia, in spite of marginal pullbacks by OPEC the last few months.
Real production cuts need to be agreed to – something that has been so elusive in the past two years, that it’s getting hard to remember just when major players could agree on anything of substance.
With a little less than four months left in the year, plenty of analysts and traders are giving updated analysis on where prices will be for the remainder of the year and 2017.