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OPEC Cuts Short Term Solution to Lower Energy Demand

OPEC appears poised to extend oil production cuts at it’s May meeting, yet the 13 member oil producing cartel seems destined to face a crossroads in which it will be made to choose between preserving a price floor or protecting market share, according to a senior economist.

“OPEC’s output cuts will most probably be extended at the May 25 meeting, yet things do not look so rosy for the cartel beyond the near term,” Konstantinos Venetis, senior economist at research firm TS Lombard, said in an email.

“Come 2018 OPEC members will be hard pressed to choose between maintaining a price floor and protecting market share, unless global demand is surprisingly brisk,” he added.

OPEC and non-OPEC producers are widely expected to announce an extension to cuts in oil output in a meeting on May 25. The group seems well positioned to continue with its attempts to eliminate a global supply overhang which has depressed prices to less than half their 2014 high.

OPEC, Russia and other oil producing nations had agreed to curtail oil production by 1.8 million barrels per day (b/d) for six months, from January 1.

via CNBC [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
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
Alfonso Esparza

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