Production Freeze is meaningless

[dan_s]

I personally believe it doesn't matter what OPEC, Russia or anyone does because supply/demand fundamentals will set the price of oil. Fundamental forces are already reducing production and increasing demand. An agreement to "freeze" production may calm the market and scare off some traders that have been shorting oil, but the fundamentals will force up oil prices just as they have done in all previous cycles. - Dan

Oil prices have recovered over the past weeks as news about a coordinated production freeze between OPEC and non-OPEC members has given the commodity a more stable footing in the market. Both U.S. and international crude benchmarks WTI and Brent are up over $40 per barrel as markets hope that cooperation between a group of nations representing 73% of global production might bring supply and demand into balance.

The news has been seen in a positive light by markets, but the IEA called the coordinated production freeze “rather meaningless.”

“Amongst the group of countries [participating in the meeting] that we’re aware of, only Saudi Arabia has any ability to increase its production,” said Neil Atkinson, head of the IEA’s oil industry and markets division, reports The Guardian.

“So a freeze on production is perhaps rather meaningless. It’s more some kind of gesture which perhaps is aimed … to build confidence that there will be stability in oil prices.”


Read more: http://www.oilandgas360.com/production- ... gless-iea/