Sticking your neck out can be a dangerous thing particularly when it comes to predicting an OPEC decision to cut oil production. Madame Giullotine stands waiting to welcome those who get it wrong, I got it wrong, or did I?
Yes, the OPEC deal did go ahead despite more false starts than an Olympic 100 metres final. But was the decision to cut oil production political or based on market fundamentals?
In my blog of the 29/9/16, I argued that the market fundamentals would mean that an OPEC cut wouldn’t work because as soon as the oil price hit $55 the US would turn on the shale taps. That would mean that any agreement to restrict production would be put under strain. As Russia is the weakest link and Saudi the strongest, I was not overly surprised by the developments revealed this morning.
Reading the FT I see that the Saudi and Russian oil ministers are working to “consolidate” the production cuts as the market comes under pressure because of the increased shale supply from the US. Hey, guess what, the oil price is $55 today.