After the OPEC+ meeting, oil lost almost all its recent gains.
The reason for this was that OPEC+ countries did not announce production cuts as a collective policy of the cartel.
It was stated that each country would individually declare its cuts since these are voluntary reductions rather than a group policy. Angola effectively opted out of adhering to the policy.
On one hand, this suggests that Americans have to some extent undermined the cartel’s unity. Countries sabotaging the agreement might not comprehend that selling 5% more oil at 10% lower prices results in less revenue. This is reminiscent of our own Sechin during the oil war between Russia and Saudi Arabia.
American financial houses, as previously mentioned, are bearish on oil. Any disagreements within the cartel are used for speculative attacks to drive prices down.
On a positive note, key countries have agreed on voluntary cuts, even though not as part of a collective agreement. Their individual statements could support the market if made periodically. Specifically:
- Algeria agreed to cut oil production by an additional 51,000 barrels per day.
- Kazakhstan agreed to cut oil production by an additional 82,000 barrels per day.
- Saudi Arabia agreed to extend the production cut by 1 million barrels per day.
- Russia’s Deputy Prime Minister Alexander Novak stated that Russia would increase voluntary oil export cuts by 300,000 barrels per day and extend existing voluntary production cuts by 500,000 barrels per day.
- Oman will cut production by an additional 42,000 barrels per day.
- Iraq will voluntarily cut production by 211,000 barrels per day.
- Kuwait will cut production by 135,000 barrels per day.
- The UAE will cut production by 163,000 barrels per day.
Additional cuts will only commence from January.
On the downside, there are no visible additional cuts from Saudi Arabia. For now, the situation looks something like this.
As I mentioned before the OPEC+ meeting, the strategy was planned well in advance. The meeting has yet to prove its worth. Now, we wait to see how the fundamentals perform and how strong the cartel’s main countries and American financial houses are in the market… Let’s see. For now, I am bullish on oil, but the situation is not the best.
