Moving to prop up prices, OPEC and its oil-producing allies agreed on Friday to cut production by 1.2 million barrels a day despite pressure from President Trump to maintain current output levels and keep prices low.
Saudi Arabia, OPEC’s de facto leader, will make the biggest cut. Russia, which is not an OPEC member but is an increasingly important factor in global oil markets, will account for much of the rest.
In fact OPEC is cutting 800k/BPD and Non-OPEC, led by Russia, is cutting 400k/BPD.
I beleive this is a big deal because the Saudi’s did not want a repeat of several years ago when oil prices plunged as OPEC tried to run US shale prodcution out of business.
It is my contention that OPEC and Russia would like to see oil prices in the $70-$80 per barrel range.
Regardless, the volatility in oil prices is leading oil companies and state owned oil companies to not invest the required money in order to replace and grow production. My thesis is that this lack of investment will lead to an oil price spike in the future.
The view that oil demand is declining because of EV’s and carbon taxes is not correct. I agree that oil demand in the west is stalled but what about the emerging markets.
As emerging and frontier markets continue to industrialize and urbanize energy demand will increase. Oil is the primary transportation fuel and will continue to be for decades. The world is consuming 100 million barrels of oil per day. It requires hubdreds of billions of doallrs to maintain that supply much less increase.
That investment has not occured and we will see higher oil prices.
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