Well that was a big waste of time. I am referring to this week's quarterly OPEC (Oil's Perpetual Enmity Coalition) no decision meeting . None the less, a pivotal meeting in several ways.
This meeting used to be a very easy read simply by knowing the OPEC committee meeting's proposal recommendation held the day before, a crude trader would be reasonably sure of the following day full member OPEC meeting concenses results. Unfortunately with the strong rift between Sunni and Shiite sects within OPEC, committee recommendations are no longer guaranteed of receiving approval. This was the reason OPEC was not able to agree on increasing crude production quotas.
Saudi Arabia, (Sunnis), rightly argued that current crude oil production needs to increase 2 million bbls per day to meet projected demand. Iran, (Shiite), realizing that Saudi's crude is of a higher sulfur and more expensive to refine quality, understands that the world does need more crude but not the kind coming out of Saudi Arabia. They along with other Shiite dominated OPEC countries decided not to agree to the production increase.
Several television business commentators were arguing that this infighting ultimately means OPEC is no longer relevant and has lost its power to control crude production and ultimately crude pricing. On the contrary, OPEC is more relevant than ever and will continue to be so until alternative energy sources begin to compete with crude as a transportation fuel.
Saudi Arabia understands that even if they produce more crude, it is of the quality that refiners do not want. What refiners need is more production of lighter sulfur crude produced by Libya and Nigeria. As long as Libyan production remains off line, there is no country having excess capacity that can fill the demand gap.
Barring the entire global economy sinking deeply into a deep recession, CL futures will remain on its endless bid and higher crude prices should be anticipated.
