Back in April, we saw oil prices increase based on talks of a production freeze from Organization of the Petroleum Exporting Countries (“OPEC”). We discussed this in our posts “Good News: Oil Prices on the Rebound” – where prices increased 4%, and “Optimism in Oil Prices.”
As of this morning, WTI Crude was $48.10 per barrel and Brent Crude was $50.75 per barrel – according to Bloomberg Energy. Crude is reportedly now up more than 20% since it settled below $40 a barrel on August 2. And OPEC is scheduled to meet next month….and they are expected to renew talks of a production freeze.
Talk about déjà vu…which I recently learned is an expression derived from the French, meaning “already seen.”
The recent increase in oil prices is once again linked in part to news that OPEC and major producers and exporters “will probably revive talks on freezing output levels when they meet in Algeria next month,” according to CNBC article “US Crude Rises to 6-week high above $48 a barrel on talks of supply freeze.”
The CNBC article goes on to report, “[m]any OPEC members have been hurt badly by a collapse in oil prices over the past two years. While some Gulf exporters have very low output costs, other producers such as Iran and Venezuela need oil prices above $100 to balance their budgets.”
The Wall Street Journal also reported today that the rise in oil prices were “on hopes that the world’s largest exporters would revisit a deal to freeze output.”
Interestingly, OPEC issued its’ Monthly Oil Market Report last week and the featured article was “Crude and Product Price Movements.” A full copy of the report can be found here.
Many are skeptical whether a production freeze will actually come to fruition this time around, after facing a dead end last time. Remember that in April, the officials from 18 oil-producing nations failed to reach a deal to freeze oil production while meeting in Qatar because all parties couldn’t agree to participate in the freeze. A good refresher on what happened in April when OPEC members tried to get on the same page about a production freeze can be found in The New York Times article from April 17, 2016 entitled, “In Doha, Major Oil Exporters Fail to Agree on Production Freeze.”
We will keep you posted on next month’s OPEC meeting and the status of the talks on a potential production freeze…