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When the Real OPEC Oil Deal Will Happen

by | published September 28th, 2016

When OPEC and Russia didn’t agree to cap oil production in the International Energy Forum in Algiers, CNBC’s Closing Bell invited Dr. Kent Moors to explain why, and what’s next.

In this video, Kent explains why a final deal was never going to be agreed on in Algiers, when the real oil cap agreement will be concluded, and reveals his latest oil price forecast.

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  1. Bob Schubring
    September 29th, 2016 at 20:55 | #1

    Back in the day, had any bunch of Texas oil producers pumped a major field flat-out for two years, as Russia and Saudi Arabia just did, they’d have driven the competition out of business and created a shortage of railroad cars to move oil.

    So, legislators contrived the notion of “equal access to railcars”, whatever that meant, appointed a State Railroad Commission, and empowered it to impose quotas on how frequently oil wells could be pumped…ostensibly to ensure that every oil producer had equal access to the markets.

    Nobody challenged the constitutionality of the law, for a very simple reason: Production quotas were profitable.

    The Hunt Oil Company’s giant East Texas Field would have offered a huge domestic reserve that could have been held off the markets and used for emergencies.

    It would have taken some innovative legal thinking to make it possible. There would have to be a futures market in oil, and probably an exemption to anti-trust laws to allow a strategic oil stockpile to operate and smooth out small bumps in demand.

    As matters turned out, Saudi Arabia went into production and that problem of leveling out supply got resolved on today’s global markets. Still and all, few Americans appreciate the fact, that fuel stays available because some production always remains in reserve, to cover sudden demand.

    It’s apparent to me, that the new, to-be-published production ceilings of OPEC, Iran, and Russia will represent surge capacity that, for a premium price, can be put on world markets to cover futures that aren’t delivered due to emergencies. Russia is best-situated to cover Asia’s spot market…pipeline flow can be increased immediately by powering on more pumps and raising line pressure (assuming the customer pays for the additional energy needed for pumping)…Iran, Saudi Arabia and Indonesia can all contribute to the Indian subcontinent, but deliveries are slowed by the need to move oil by ship.

    It was a dumb mistake to view US shale producers as the primary target of Saudi policy. What’s going to happen, is that Saudi Arabia will buy US shale fields for unpaid debt.

    The people who start screaming shrilly about the Saudi takeover of US oil fields, will be the ones who wasted a lot of money on Tesla stock, guessing that lithium would appear on markets by magic, and won’t believe that the Gigafactory loses money…until it starts doing just that.

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