OPEC would benefit from more transparency about oil prices. The group has geared its efforts to rebalancing the market, but its ultimate goal is surely to maximize revenues for its members. Putting a number on this target would be helpful. After all, with many ministers claiming there is still a distance to go when the alliance has pretty much realized its stated aim, the focus on fundamentals is starting to look like a fig leaf. OPEC and Russia, joined by a group of smaller producers, have focused on bringing bloated oil inventory levels in OECD countries down to the five-year average. With overcompliance to the deal, they have reduced their collective output by more than the agreed 1.8 million b/d since January 2017 and cleared an overhang of almost 400 million barrels in an unprecedented move. Prices have skyrocketed 33% to well above $70/b in that time, raising two key questions: **At what point do prices destroy currently healthy demand? **At what point does a new wave of production, from US shale to deepwater, ease fears of a supply shock after several years of underinvestment? Analysts themselves have yet to reach a consensus. THE PRICE OF SETTING PRICES The clear… continue reading
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Source: CTRM Center