Javier Blas of Bloomberg reports that the late Robert Mabro, one of the savviest oil-market observers, liked to say the cartel only got the job done when it was under prolonged financial pain. To judge by its latest actions, OPEC+ has yet to realize it’s inside a warming kettle. Blas writes:
OPEC+ is like a teabag – it only works in hot water.
Saudi Arabia, Russia and other oil-producing nations have now agreed to delay by two months a planned output hike that was scheduled to start in October. The delay came after Brent, the petroleum benchmark, fell to one-year low below $75 a barrel.
In the short term, postponing the output hikes until December should support oil prices. By giving up an increase of 180,000 barrels a day inOctober and November, OPEC would keep the market roughly balanced next quarter, rather than creating a surplus. […]
For the next few weeks, the water temperature will slowly increase. By December, the kettle should be whistling. Then – and perhaps only then – OPEC+ may jump into serious action. But I remain unconvinced that the cartel would coalesce into defending the high price that Saudi Arabia wants.
Read more here.
