Everyone is scrambling for a new plan now --- now that oil is in its third mini-bust since the major bust cycle that began in 2014.
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Since the lows in early 2106, oil has made three retreats; in July/August of 2016, in November of 2016 and right now, in June of 2017. But this retreat is different, in that it comes after the extension of OPEC production cuts that are scheduled to last until mid-2018. Those cuts have not helped oil to maintain prices above $50, they have in fact heralded this latest drop.
And that’s bad news for everyone – OPEC, U.S. producers and for us as oil investors.
Previous plans based on an inevitable rally in prices have been made by all three of these groups, and all of them now have to revisit how they’re going to go forward from here.
OPEC has staked much in their ability to still control oil prices using these production cuts. Now that their efforts haven’t helped to support prices, they’re likely going to have to consider a new strategy. Will they extend cuts further? Will they try to get even deeper production quota cuts from members? Or, will they abandon the effort to limit production and return to the ‘free-for-all’ battle for market share that they used in through 2015 and into late 2016? That effort mostly failed to bankrupt US producers and trim US production, which has rebounded to its highest levels today, above 9.2m barrels a day.