OPEC delivered a very substantial production cut on Wednesday in Vienna, and first, I need to take a victory lap: – I was one of the very few (I believe Francisco Blanch of BofA was the only other), who predicted that OPEC would be successful. In my last oilprice premium column, I also gave two stocks to buy to play the meeting, Noble Energy (NBL) and Oasis Resources (OAS), which were up 11% and 28% on Wednesday. I'd call those two pretty good trades.
No time to stand on your laurels – everyone wants to know where I think oil prices and oil stocks to go from here. Here are my thoughts:
I had expected the agreement to come out of Vienna to be substantial, and it was: I assumed that Saudi Arabia would “go it alone” for the full brunt of the necessary 1.2-1.5m barrel a day cut if they had to, but they got a whole lot more from both other OPEC and non-OPEC producers. Despite pessimistic posturing from both Iran and Iraq about being unwilling to accept any limitations, the only complete exemption in Vienna was given to Indonesia. For the Iranians, a full 6 month freeze was agreed to - and using less advantageous independent production numbers. Iraq agreed in essence to similar terms. This marks tremendous concessions by the Shiite members in OPEC, halting below both of their 'golden' production goals of 4m b/d for Iran and 5m b/d for Iraq.
It was a stunning achievement for the Saudis. The OPEC cartel proved it was prematurely thrown into…