26 May, 2017
It may be a necessary move, as the slump in oil prices after Thursday's agreement showed growing skepticism about the effectiveness of the cuts.
Oil economist Judith Dwarkin suggests Canada's oilpatch should savour OPEC's oil cut while it lasts.
The market was less convinced.
"The bottom line is - enjoy this while you can".
OPEC will face the test of defending market share and generating revenue growth as it transitions from the curbs, Goldman Sachs Group Inc. analysts including Damien Courvalin said in a May 25 report.
"India is the only country where the demand will continue to rise for more than a decade and this is where the need for revisiting our engagement with OPEC is felt important", he said. "It will have more benefit in 9 months and we think it is a period that will have more stability in the market", Press TV quoted Iraqi Petroleum Minister Jabbar Ali Hussein Al-Luiebi as telling reporters following the OPEC meeting here.
Hamm, however, said US production is only part of the global picture. Others pointed to concern that USA production continues to grow.
"Oil was practically begging to be knocked off its perch after rallying into the OPEC meeting with wide expectations [for] extended cuts", noted ThinkMarkets senior market analyst Matt Simpson.
Investors in the financial markets weren't much impressed by this agreement. "Typically under that scenario you would have prices, I would argue, materially higher than where they are right now".
According to the FT, India's minister of petroleum and natural gas, Dharmendra Pradhan, said the country is evaluating buying crude from other sources other than OPEC - such as the US - given the potential supply threat the cartel poses to its energy security.
Making the long oil trade all the more hard is that high USA oil inventories mute the impact of output reductions by OPEC and other countries, indicating that oil bulls need to focus on other factors. "The prospect of a third U.S rate increase by the Federal Reserve in 2017 still remains under threat, especially when considering how Trump uncertainty still remains a major theme".
Thursday's sell-off came after the oil price jumped 98 cents to $50.33 a barrel on May 19 when Saudi Arabia reached the deal the rest of OPEC approved Thursday.
The U.S. shale and tight oil industry are the big winners following the announcement, as higher oil prices will "further support" it into 2018.
Oil prices had risen sharply in the 2 1/2 weeks before the OPEC meeting, as an extension of the current production cuts became increasingly clear.
With Russia and Saudi already having announced this last week, Opec should have delivered more this time by announcing deeper cut or longer time if they really wanted to balance the oil market and prop up the prices. After all the rise of USA shale is one of the central reasons Opec, Russia and the other countries had a problem to start with.
