OPEC Nations To Pressure Saudis to Reintroduce Oil Price Band

The safe money for oil traders is betting that Venezuela’s plan to resurrect OPEC’s old price band mechanism, attempting to set a $70 floor for the battered market, will be doomed from the start.

Saudi Arabia, the group’s de facto leader, has shown zero interest in returning to a strategy of supporting prices; big producers outside the Organization of Petroleum Exporting Countries, namely Russia, have essentially ruled out cuts. And most analysts say attempting to set a price range is futile, or that the $70 price is unsustainably high, or both.

Yet a handful of experts and observers say the proposal – articulated by former oil minister Rafael Ramirez in an interview with Reuters – may be a catalyst for moving away from OPEC’s laissez faire approach to collapsing oil prices, which throttled investment, shredded budgets and left some economies, such as Venezuela’s, teetering on the brink

Even if the idea fails to advance, it could represent the first meaningful step in months toward finding common ground that could help stabilize the oil market.

The plan, to be discussed at an Oct. 21 meeting of technical experts in Vienna, seems simple: progressive production cuts to control prices, with a “first floor” of $70 per barrel and a later target of $100 per barrel, Ramirez explained.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza