It seems that we have not reached the bottom for the price of crude oil. OPEC took investors by surprise by not taking any measures to curb price collapse at the last meeting of its members held on 27 November.
- At the last meeting, the 12 countries members of the cartel decided to retain their production quota unchanged at 30 million barrels per day and this announcement was badly received by investors. The objective of the cartel is clear: Keep its market share against other producing countries such as the United States saw its production increase by over 60% since 2010. In pushing prices down in the short term, the OPEC will reduce new American oil investment projects that need a price above the current level to be profitable. Although production companies with significant hedging programs in place to survive the current downturn, the situation will be different when the hedging contracts expire
- Note also that producing countries have accumulated substantial international reserves in recent years and this allows them to better manage the current downturn. The inaction of OPEC, Russia has also decided not to cut production. Since last June, the crude oil is now down 38%
- The position of OPEC urges us to be cautious while other oil price declines are expected in the coming days. We prefer to be patient with our customers and wait for markets to stabilize before actively recommend the introduction of new transactions.
- Have a good week!
- Emmanuel Tessier-Fleury