Freeze in Oil Production? Not buying it.

While on Mornings with Maria, we talked about the agreement between members of OPEC and Saudi Arabia to freeze oil production at January 2016 levels.

First off, I am highly skeptical that this freeze will stick. Historically any cuts, and this isn’t even a cut, have been rather notoriously violated, with quite a few such “cut” announcements necessary to get anywhere near stability in oil prices.

With the proxy war between Saudi Arabia and Russian ongoing in Syria and OPEC’s understandable desire to significantly knock back production by frackers, coupled with Iran’s new ability to sell on the global markets, there are entirely too many reason to keep pumping. I suspect we won’t see much stability in prices until a materially amount of production capacity is taken offline with the associated defaults and bankruptcies.

 

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