Crude Oil trading has been shaky this week, to say the least. OPEC announced an informal meeting for September, prompting the price to rise sharply on traders’ fear of a production cut. However, that was quickly silenced by the markets leveling out ahead of the EIA inventory report.
This isn’t the first time OPEC has frightened the Oil markets to move. Over the course of the last year, OPEC has been anything but steady. There is significant disagreement within the cartel that has caused knee jerk responses and factions within the ranks for and against cutting production.
Ultimately, this is a political situation. Cartel member states rely on Oil revenue to fuel their government coffers. The current price depression of Crude has badly hurt many of their economies, particularly the smaller states. But as with anything else, the ranks within the cartel are political as well. It is the wealthiest, largest producers who dictate output.
Mohammed Bin Saleh Al-Sada, Qatar’s energy minister and OPEC president, continued on Monday with comments regarding his conviction that the recent downward price pressure was a result of global economic issues such as Brexit and China, and are not indicative of the long-term trend.
These statements, coupled with the deep pockets and conviction not to cut production from Saudi Arabia and United Arab Emirates, all point to Venezuela, Ecuador, and Kuwait continuing to feel the pain of low Oil prices.
In short, there may be a meeting in September, but meetings have hardly signaled action so far this year. Don’t expect them to start next month.
