Oil Price and Production Cuts: markets watch the outcome of OPEC+ meeting

 

opec+ meeting in march

With just less than 24 hours to go before the crucial OPEC+ meeting, oil price showed a modest increase, reflecting the general mood in the markets that supply floodgates will not open anytime soon.

With the chasm between Iran and the US widening in the face of attacks on US interests in Iraq by Iran-backed rebel forces, the Iranian factors in realm of oil markets slowly pales into insignificance; Iran’s stubborn position on the nuclear deal does not make the process of sanctions being lifted any more realistic either.

That means the markets will not get crude oil in excess in the current circumstances and the trend in prices reflects just that.

Since a drastic output cut is not a universal view among the members of the OPEC+, they may agree on a coordinated production ‘adjustment’ until next meeting in April; this is what markets sense and hence the understandable reaction across the crude oil markets for all to see.

At the same time, the more dominant members of the OPEC+ cannot ignore the grievances of the less dominant members, especially when their economies entirely depend on the revenue from oil; they do not want to lose this opportunity when they can enrich their coffers, having suffered more than 6 years due to falling crude oil prices.

Russia that came under new sanctions on Monday, may not agree on an extended production cut either; it desperately needs cash from its oil and so far toed the line in line with Saudi wishes.

Two weeks ago, Saudi oil minister wanted the OPEC+ members exercise caution, perhaps, against easing production cuts much earlier than it should.

Whether the Saudis can get their way tomorrow as well, as they did in the past, is a development to be watched in the next 24 hours.

 

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