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How To Trade The OPEC Meeting

There has been a lot written, and even more said, about the “unofficial” meeting of oil producers that will take place early next week in Algiers. OPEC members and a few influential non-OPEC members will use the occasion of an energy conference there to meet on Tuesday to discuss possible action in support of oil prices, or, to put it more simply, to talk about a production cut, or at least a freeze. The talk from all of the participating nations has been that a deal is “possible’ and has focused recently on what would be an appropriate level at which to cap production. That makes it sound as if a deal is coming, but traders and investors shouldn’t be holding their breath or sinking their life savings into oil futures.

The talk has given some support to the market over the last week or so, but it should really come as no surprise; I wrote a couple of weeks ago that a lot of talking of books was coming. Of course there could be an agreement, but given the geopolitical realities and the current state of the oil market it looks unlikely. Firstly, participation by Saudi Arabia and, to a lesser extent, Iran is a necessary precursor to any freeze or cut, and agreement between those nations would be a shock.

Saudi Arabia is essentially a Sunni Islam country, while Iran is Shia, and that divide is seemingly irreconcilable. The two sects are battling for control of the region, and are currently fighting proxy wars in both Syria and Yemen. In…

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