Last week’s OPEC meeting in Algiers was initially regarded as quite successful but markets are still sceptical as to how the agreement will be executed. According to recent figures the overall global oil supply needs to be cut to at least 700,000 barrels per day to have any effect on the over flooding happening in the market.
On Wednesday, Iraq lost the plot by publicly asking to join the exemption list, along with the other unreliable countries like Iran, Nigeria and Libya. The agreement deal cannot fulfil its purpose if countries are still reluctant to curb outputs. On the surface they agree but on a deeper level they all fear the change. Traders are viewing the situation as a theatrical disaster unfolding slowly in front of them. This uncertainly is definitely shaking investors’ confidence as markets have slumped to 3 week lows at $48.88.
However Saudi Arabia minister Khalid al-Falih spoke with some optimism when asked about his meeting with Russia Energy Minister Alexander Novak on a potential output freeze deal. He said that “Oil markets are on the way to being re-balanced” and they are “working closely” with the Russians to calm the markets. The Saudi’s are desperate to raise the price, but it needs total co-operation with other OPEC members. For now, traders are still waiting for a hero to save the day.