Market Overview

Pro: Don't Expect Any Agreement When OPEC Meets Next Month


Oil prices rallied above the $40 per barrel mark over the past few days on an optimistic view that the Organization of the Petroleum Exporting Countries could reach an agreement that would place a limit on oil production among its member nations.

The reality of the situation, according to a  Bloomberg report, is that Saudi Arabia boosted its oil output to a record 10.67 million barrels a day in July. Meanwhile, Iran's output of 3.85 million barrels a day in July marks the highest level since 2008. As such, it may be wrong in assuming the world's largest crude exporter (Saudi Arabia) and a country desperate to make up for years of lost sales due to trade embargoes (Iran) would agree to any cuts on production and exports.

Related Link: Set Your Calendar, Oil Investors: OPEC Confirms A Meeting Set For September

OPEC convened back in April, but Saudi Arabia made it clear it won't agree to any cuts unless Iran signs on in kind. The meeting passed with no resolution and the price of oil began a downward descent in the following months.

"I doubt there's going to be any concrete agreement despite there being talks," Abhishek Deshpande, an analyst at Natixis SA told Bloomberg TV.

Outside of Saudi Arabia and Iran, Kuwait continues to aggressively target the Asian market and is offering a discount of $2.65 a barrel for Asian clients, marking a deeper discount than the $1.70 a barrel it offered back in August.

"These planned OPEC discussions may be viewed by some as a cheap possibility to try and stabilize the market," Bloomberg quoted Eugen Weinberg, head of commodities research at Commerzbank AG as saying. "It's more likely to be a way of further destroying the market's confidence in OPEC, as the organization cries wolf once again."


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