Oil: OPEC is a wildcard - BBH

OPEC is a wildcard this week for oil markets, explains Research Team at BBH.

Key Quotes

“Since the summer, the ebb and flow of speculation about OPEC's ability to reestablish some order to the oil market drove prices between roughly $42 and $52 a barrel (basis the front-month futures contract).  The central problem is that Saudi Arabia cannot abide by sacrificing market share to other OPEC members, especially Iran, and Iran for its part cannot accept a freeze of output until it fully recovers from the embargo.”

“That issue does not appear resolved, and that appears to be the reason Saudi Arabia pulled out of the meeting with Russia that was to be held on Monday (November 28).  Meeting with Russia without a full agreement from OPEC members to cut output puts the cartel at a disadvantageous negotiating position.  Separately, the restoration of Libyan output and the expansion of Kazakhstan's production warn that it will be difficult to reduce supply.”