It is easier for a cartel to control prices when they are moving up. You can add supply. If you are unable to increase supply, you are still a winner in a cartel. When prices are falling, you have to cut supply, but the temptation to cheat is just too great. Prices will continue lower.
OPEC announced cuts of 9% or 2.5 million barrels a day to 24.845 per day. We will see if this reduction will hold prices steady. This is unlikely if we know how cartels work. Last month countries actually produced about 630,000 more barrel than expected. Russia also said it would cut production but the need for foreign exchange is significant.
The oil market is in contango so inventories re building. With global growth continuing to slide lower, it is not clear that the current cuts will control the price. Lower prices have removed the energy consumption tax but this will not be enough to help growth.
OPEC announced cuts of 9% or 2.5 million barrels a day to 24.845 per day. We will see if this reduction will hold prices steady. This is unlikely if we know how cartels work. Last month countries actually produced about 630,000 more barrel than expected. Russia also said it would cut production but the need for foreign exchange is significant.
The oil market is in contango so inventories re building. With global growth continuing to slide lower, it is not clear that the current cuts will control the price. Lower prices have removed the energy consumption tax but this will not be enough to help growth.
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