17 Feb 2016
Oil: Saudi and Russia agreement not so slick - ANZ
Research Team at ANZ, notes that overnight Saudi Arabia and Russia reached a preliminary agreement overnight to freeze their oil output at near-record levels.
Key Quotes
“This is described by Bloomberg as “the first significant cooperation between OPEC and non-OPEC producers in 15 years”. Qatar and Venezuela are also on board. No cuts in production were agreed, however, given oil producers are battling for long-term market share, which weakens the impact of the agreement significantly, as does the lack of involvement by Iraq and Iran.
Oil prices are currently around 70% lower than their 2014 peak, and appear to be headed still lower on current global production rates. Certainly the market’s response to the agreement suggested they are underwhelmed: oil fell back having gained before the meeting.
Oil prices at current levels are profitable for very few, and so we find ourselves in that classic commodity equation: the best cure for low prices is low prices. But in this stubborn industry it could be a while.”
Key Quotes
“This is described by Bloomberg as “the first significant cooperation between OPEC and non-OPEC producers in 15 years”. Qatar and Venezuela are also on board. No cuts in production were agreed, however, given oil producers are battling for long-term market share, which weakens the impact of the agreement significantly, as does the lack of involvement by Iraq and Iran.
Oil prices are currently around 70% lower than their 2014 peak, and appear to be headed still lower on current global production rates. Certainly the market’s response to the agreement suggested they are underwhelmed: oil fell back having gained before the meeting.
Oil prices at current levels are profitable for very few, and so we find ourselves in that classic commodity equation: the best cure for low prices is low prices. But in this stubborn industry it could be a while.”