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Production cuts a “waste of time” and a freeze “laughable”

Published Monday, February 29th, 2016

At about this time last year oil executives meeting at the CERA annual conference were hopeful that oil prices had bottomed, despite forecast supply and demand numbers that showed quite clearly that it was almost certainly wishful thinking. Perhaps at the time they thought OPEC would blink and cut production or perhaps they believed that the response of non-OPEC supply and global oil demand to the price collapse would accelerate. We now know that the numbers were right and oil executives were looking through rose-coloured spectacles.

One year later at the same conference the mood has been sombre, pessimistic and even suicidal. The industry is in survival mode declared the head of Ecopetrol. Oil executives have learnt this week that there is no prospect of an OPEC production cut. The Saudi oil minister described cuts as “a waste of time”. The very best they can hope for is an OPEC production freeze with assistance from Russia and that is by no means guaranteed. They will not know until mid-March at the earliest, assuming a proposed meeting goes ahead, whether a freeze is a real possibility, what the reference production level will be or whether Iran and Iraq will be included. The working assumption has to be that Iran will be excluded given the Iranian oil ministers description of his county’s participation in a freeze as “laughable”.

to read the rest of the report, please click here

Posted by David Hufton