OPEC and Russia Oil Production Freeze Talks Pressured by Lower Prices

Price wars can be painful — even for the mighty OPEC.

That’s why the oil cartel, along with Russia, is once again entertaining a freeze in production aimed at putting a floor beneath low prices.

The goal is to keep prices high enough to give oil-reliant countries a financial boost, but not so high that they encourage their chief rival — American shale oil producers — to start pumping aggressively again.

However, the very fact that these talks are taking place is evidence of the enormous financial damage inflicted by low prices on oil-rich governments, and their increasingly restless citizens.

At one end of the spectrum, cheap oil is causing food shortages and outright chaos in OPEC member Venezuela. Even the cartel’s kingpin Saudi Arabia has been forced to usher in painful austerity moves. And it’s one of the chief causes of a deep recession in Russia.

“No sovereign producer can be judged a winner,” Helima Croft, a former CIA analyst who is now global head of commodity strategy at RBC Capital Markets, wrote in a recent report. “It is only a question of which cash strapped country can be declared the biggest loser.”

via CNN

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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