OPEC’s future seems to be grim
OPEC is aiming to obstruct the supply of oil for another 9 months. In other words, it will be extended until the end of March 2020. This is their strategy to keep the prices of crude oil from falling.
Although the cuts were supposed to expire – which was first implemented in 2020 – they decided the extension due to the fact that “economic bearishness is now increasingly prevalent” and “geopolitical issues”.
“After 2-1/2 years of production cuts, the effects of rolling over production cuts is losing steam. The trade war is not likely to get resolved any time soon and while central banks globally are expected to deliver fresh stimulus in the coming months, economic activity is continuing to trend lower, ” said Edward Moya, senior market analyst at OANDA in New York, as reported by Reuters.
Saudi Arabia, the most significant producer within OPEC and Russia, the most powerful non-OPEC partner met during the weekend to discuss about the decision.
“During the meeting, they discussed the options for extending the OPEC + deal, as well as the cooperation in the oil and gas sector between the Kingdom of Saudi Arabia and Russia,” the Saudi Press Agency reported.
The production cut of oil gained the support of Iran, too, irrespective of the fact that Saudi Arabia and Iran are regional rivals.
(Reference: Investing.com, Reuters, NPR, CNN Business)