Just as I was finishing up Monday’s Oil & Energy Investor, information emerged that something was happening with OPEC. I made mention of it in a note appended at the end of that installment, finishing with the observation that it “Looks like somebody just blinked.”
Well, that somebody is OPEC, and there is much more behind this development, leading to today’s discussion.
In its monthly report released on Monday, OPEC indicated it is now willing to discuss production levels with other non-OPEC countries. This is the first indication that the low crude oil price environment has been creating serious problems inside the cartel.
However, this needs to be put in perspective. A “blink” is not “crying uncle.” And an op-ed piece appearing in the OPEC Bulletin is not a blanket statement of a policy change. But just the same, comments don’t find their way into this publication without the consent of the OPEC Secretariat in Vienna and the dominant Saudi presence within the organization.
The OPEC strategy of keeping production constant to maintain market share, even in the face of a precipitous decline in oil prices, has been unraveling for a while. As I have remarked in Oil & Energy Investor on numerous occasions over the last nine months, the approach has left the cartel seeing budgetary red ink.