By: Sara Nunnally of Street Authority
The latest rumor around the global water cooler that Russia and OPEC-leader Saudi Arabia have agreed to freeze oil production at January or February levels has been dispelled... for now.
The OPEC leaders meeting in Doha failed to reach an agreement to cap production, with Iran bowing out of the meeting altogether, and refusing to pull back on its oil production. As a result, oil prices took a big tumble. Brent crude fell a harsh 7% on the news. West Texas Intermediate (WTI) fell almost as much at 6.6%.
But does a "no deal" result from the OPEC Doha meeting mean production caps are off the table? Or that OPEC wouldn't seek an alliance outside its cartel?
In response to the meeting, Qatar's energy minister Mohammed bin Saleh al-Sada said, "We of course respect [Iran's] position... The freeze could be more effective definitely if major producers, be it from OPEC members like Iran and others, as well as non-OPEC members, are included in the freeze."
Al-Sada said that OPEC members need more time. Which says to me that this won't be the last we hear of production caps.
Indeed, this wasn't the first time we'd heard about potential cooperation between OPEC and Russia, either.
The rumor of a possible oil production freeze lifted oil markets as much as 4.7% and kept prices for WTI above $41 mid-week last week. That means oil prices have been on a wild ride. Take a look at WTI futures: Continue reading "What To Expect In The Oil Market"