Technical & Fundamental Oil Reports Specialists

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The market needs a production cut, not a freeze

Published Wednesday, February 17th, 2016

At a meeting in Doha early London time yesterday the oil ministers of Qatar, Saudi Arabia, Russia and Venezuela agreed to freeze their oil production at January levels providing other major producers follow suit. News of the meeting, which came out after Monday’s close, pushed prices up $2 bbl, but when details of the agreement emerged prices fell back and kept falling throughout the day.

Brent touched a high of $35.55 bbl (+2.16) but the excitement did not last long. Once again speculators showed impatience and reacted to the headline rather than wait for the detail. The agreement has no clothes and avoids the problem of who cuts by agreeing that no one will cut. The Saudi oil minister cannot be serious when he says that “freezing now at the January level is adequate for the market”. It may be adequate by the end of the year, but not if the aim is to lift prices now. Brent ended the day down $1.21 at $32.18 bbl and WTI closed -40cts/bbl at $29.04 bbl.

The agreement may be the beginning of a journey that ends in a deal that will generate a sustainable price increase but what came out yesterday, other than the fact that they met, was vague and unimpressive

to read the rest of the report, please click here

Posted by David Hufton