OPEC Has Figured Out Their Chatter Is Enough To Keep Crude Bid


OPEC has been threatening a deal to cap oil output for more than a year now. They have brought into the debate non-OPEC countries, like Russia, to indicate just how serious they are about this cap. They even have war torn and sanctions ravaged Iraq and Iran on board; or so they want us to believe.

No deal is imminent, though they have been doing a great job keeping WTI bid above $45.00. They have learned a simple trick; talk the markets higher. Every time the deal to cap production breaks down, which has occurred dozens of times over the past year, just send out the Oil Ministers and the Finance Ministers to talk about the next meeting, and the next more aggressive cap level; just keep talking about cuts in production.

In return, algorithms at banks, brokerages, and hedge funds around the world, not humans mind you, will cue off of the news headline to buy, buy, buy, and the oil exporters get what they want; higher oil prices. Moreover, now that the U.S. is a major producer of oil, it helps boost stocks too. Guess who also owns stocks? Yes, the same oil producers (think Saudi Arabia). It has become comical if not criminal.

OPEC and non-OPEC members are not properly incentivized to agree to an output cut; their rhetoric has proved sufficient. Who needs a cut when you can spoof an algo and get the same results.

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