There might have been a lot of skepticism in the preliminary OPEC production ‘deal’ that was announced a few weeks ago in Algiers, but much of that is now fading away – for good reason.
While others might have wondered how the numbers were going to ‘add up’, I remain convinced that the Saudis, once they publicly commit to controlling OPEC output, will find a way to make the numbers work. The macro takeaway from the preliminary talks just concluded with the Russians in Istanbul on Wednesday is that we’ll see a real OPEC deal in Vienna in November, and oil will continue to slowly but surely rally to the end of the year.
But at a more granular level, the trajectory of that rally is still fraught with specific troubles and interesting side stories. The first would be the Saudi ‘give up’ of market share competition and apparent readiness to sacrifice a few hundred thousand barrels of sales for another fifteen dollars a barrel in sales price. While U.S. shale producers aren’t exactly in a position to gloat over the turnaround in Saudi strategy, they ought to at least get a comforting laugh out of this quoted statement to U.S. independents from the UAE oil minister in Istanbul: "If we all collectively agree that there is an oversupply then we need to collectively participate in fixing this. We are sending an open invitation to everyone."
After a collective OPEC effort to crush US oil production, I’m sure…