This article was published by The McAlvany Intelligence Advisor on Monday, May 15, 2017:
Setting the stage for the OPEC meeting on May 25, Saudi Arabia’s Oil Minister Khalid al-Falih, promised on Friday that “OPEC will do whatever it takes to rebalance the global oil market.” Whatever that means, and whatever comes out of that meeting, it won’t be enough to“rebalance” the oil market (rebalance: raise the price of oil sufficiently to reduce significantly the deficits the cartel’s members are currently running).
If the cartel repeats and extends the present agreement by six months, it’s likely to have the same impact: immeasurably small. The last agreement promised to cut 1.8 million barrels per day (bpd) from its overall production. It managed to cut production by less than half that, 800,000 bpd. In the grand scheme of things (world production of oil is just over 80 million bpd), this represents a one percent reduction in global production of crude. Wahoo.
What will be discussed in Vienna will no doubt include who is going to be doing the heavy lifting, and how much. Will there be exceptions to the extension as there is in the present one? Will there be failures to comply, as there were under the present one? Will there be sanctions applied to those who cheat? What about non-members? Will they somehow be persuaded to engage in the farcical extension? From here the meeting has all the makings of Shakespeare’s comedy “Much Ado About Nothing.”