Confidence building or confidence trick?

Yesterday’s Doha dealings set in motion a process that could lead to confidence-building measures that might open the way for an agreement on production cuts somewhere down the line. In March, a clutch of major producers would promise not to exceed their inflated January output levels. If the promise was kept and the fundamentals required, there might then be cuts, no earlier than the June Opec meeting. No wonder a futures market carried away by newswire headlines fell back sharply on the actuality.

The Saudis present it like this: “Let us freeze first and see if there is a will among everybody to co-operate in such a freeze. Let us see the effect of that freeze. If it is sufficient to create a better psyche for the market, and the market stabilises and improves, fine. If not, at least we have a good level of trust among us.”  Continue reading

The riddle of Opec

Opec is an organisation riddled through with contradictions. It has ceded control of the oil market in an attempt to retain control of it. It is tackling high-cost oil by making low-cost oil expensive to produce. It talks of a market rebalancing being just around the corner but on the same day its most high-profile individual insists such a move will take an unspecified amount of time.

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