Thursday, 15 June 2017 00:00

OPEC is Wallowing in Failure

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OPEC has fallen from grace. Its exalted status has carried it for decades, but its power is now so deeply diminished that it cannot push prices up even with a large coordinated output cut. The group hoped its efforts to reduce supply would clear the glut from the market and raise prices along the way. However, its efforts have been undermined by growth in output outside of OPEC, such as from US shale. Because of this, crude stockpiles are remaining stubbornly high, showing that the oil market is not improving.

FINSUM: we have been saying this for months, but want to reiterate it—the structure of the oil market and the fact that the resource is abundant means there is an effective price ceiling on oil around $50.

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