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Page added on October 1, 2016
OPEC and the stagnant price of oil
The 15th International Energy Forum, held in Algiers earlier this week, saw OPEC members decide to cut production by about 800,000 barrels per day. The cut will not be consistent across all member states but is significant nonetheless, being the first in eight years.The move is meant to stabilise global oil prices.
“Today OPEC has taken an historic decision. OPEC will go back to its role of monitoring the market. It’s a role that it lost many years ago, that it is now reclaiming,” said Noureddine Boutarfa, the Algerian energy minister.
| We’ve seen that in the past, when Saudi Arabia was serious about cutting down oil, it has significantly impacted the oil price. |
Many oil income-reliant states have welcomed OPEC’s decision in light of the dramatic drops in oil prices from $110 per barrel in 2014, to less than $30 per barrel this year.
However, details on the production cut are still vague. There are yet to be any specifics concerning which of the OPEC states will be set to decrease their output, how long for, and when the plan will come into play.
With a formal OPEC gathering set for November 30 – which means that realistically, effects from this decision will only really come to fruition in 2017 – concerns about compliance are arising.
Experts say the oil price wars have been affected by the competition between traditional oil producers and US shale producers.
Regionally, there is also a high tension relationship between Saudi Arabia and Iran to consider. Saudi Arabia and fellow Gulf states, however, maintain that no politically-driven decisions have been made. Some analysts have faith in what is to come from these member states.
“The change in tone, the body language from Saudi Arabia, that they are willing to work together with other producers… and it’s not that they haven’t been trying to do that – other producers have to give something as well,” says Amrita Sen, chief oil analyst at Energy Aspects, an independent research consultancy.
5 Comments on "OPEC and the stagnant price of oil"
rockman on Sat, 1st Oct 2016 8:15 pm
“OPEC decided to cut production by about 800,000 barrels per day…being the first in eight years.The move is meant to stabilise global oil prices.”
Currently producing 33.24 mm bopd. Cut 800,000 bopd = new rate 32.64 mm bopd. OPEC production 8 years ago (Aug 2008) = 32.5 mm bopd.
Production cut of 3.4 mm bopd 7 years ago. And then a production cut of 1.4 mm bopd from Aug 2012 to Jan 2013. And a production cut of 1.4 mm bopd from March 2013 to Jan 2014. And going back a tad further: a 1.8 mm bopd production cut from mid 2005 to late 2006.
So these spinners apparently hope no one bothers to fact check their 800,000 bopd being the first production production cut in 8 years bullsh*t. I’ll let everyone decide on their own if those much larger production cuts over the last decade led to “stabilizing global oil prices”.
joe on Sat, 1st Oct 2016 10:59 pm
If they do nothing people might openly question the point of opec. With massive amounts of oil stock piled and Saudi promising to sell shares then they need a good price to boost the propaganda. Tight oil will cap the prices rest assured. As long as money is cheap.
Saudi is in deep deep trouble.
shortonoil on Sun, 2nd Oct 2016 7:09 am
“The 15th International Energy Forum, held in Algiers earlier this week, saw OPEC members decide to cut production by about 800,000 barrels per day. “
So OPEC is going to cut production (maybe) by 800,000 barrels a day. For a market that is already over supplied by (our numbers, 4.75 mb/d, others 10) that should be about as effective as jumping from an airplane without a parachute. If they extend their arms they can slow down about 2 mph before they hit the ground!
This is just more jawboning to keep the illusion of the oil age alive. The industry has seen its revenue decline by $1.7 trillion per year, and no one is replacing the reserves that they are extracting. It is a train wreck in progress, and the train is accelerating as it goes over the cliff. We are not supposed to notice that because OPEC is talking about cutting production?
What’s next? Their announcement that Kepler Elves, and Fairy God mothers will be running the oil fields from now on! Maybe that they are in negotiations with the Martians to buy the excess inventory? Depletion has cut the bottom out from under the industry, and there is nothing that they can do about it; except to tell Fairy Tales.
http://www.thehillsgroup.org/
Sissyfuss on Sun, 2nd Oct 2016 10:35 am
Short, can’t believe you haven’t commented on previous article,Big Oils Missing Barrels.That’s right in your bailiwick.
Davy on Mon, 3rd Oct 2016 6:26 am
The current financial bubble will be the influence that destroys any potential momentum in oil and renewables. If this bubble pops this will be an economic downturn at least as bad as 08. How is oil price going to recover and drive E&P into a healthy growth cycle with this potential? Renewables likewise are economy driven. If energy markets suffer demand destruction how will renewables compete? How will renewables find the capital to invest when confidence in growth is shattered? Producing these new energy sources with infrastructure is expensive and long requires investment periods. Governments will not have the subsidies when so much decline is being dealt with.
The big question is when this economic drop will happen? We know cycles are part of life. I can’t imagine the business cycle being eliminated. It appears it has been adapted with a two track system (as the graph bellow paints). We have real investment and trade activity stagnating but financial assets in a bubble. We have corporate raiding benefiting from ZIRP and systematic cash excesses. How long can this divergence continue? It appears the tension is with real activity and financial activity. There is a significant amount of financial activity that is parasitic and does not contribute to real economic activity. Much of it is the extension of bad debt. Many investments are bad debt if interest rates where to go up. Systematic risk is widespread by the actions of global moral hazard of legalized corruption and manipulation. It appears the world’s financial leadership is locked in a common policy of support of the status quo. This status quo has taken on a life of its own. No nation can fight it. This makes this financial status quo a power unto itself. Such an animal must be fed or it will turn on us. The more we feed it the more dangerous and violent it becomes. That is a classic definition of a bubble and or a Ponzi.
We have other brick walls ahead but their markers are still unknown. We appear to be in their zone of influence. Peak oil dynamics is alive and well. Abrupt climate change is gaining force with destructive consequences. Population continues to rise with destructive consequences. Geopolitical instabilities are too numerous to list. Social decay is rampant. This are lines in the sand of collapse but ahead further down the road. The economy is immediately in front of us. It is the economy that will power an energy transition. Without a healthy economy oil will not recover and renewables will never get off the ground.
“Here’s Why You May Want To Tiptoe Out Before The Party Ends”
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“It’s just another massive bubble, a financial engineering bubble. It is a bubble driven by the cold calculations of the criminal masterminds in the C-suites of America’s corporations. It is a bubble enabled and funded by the mass insanity of central bankers and clueless investors around the world. And it is a bubble egged on by the cheerleaders on Wall Street and their financial media handmaidens.”
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