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Why OPEC Cosmetic Cut in Production not Enough to Stabilize Oil Price

OPEC member countries at last agreed for 750k barrel per day oil product cut. The adamant Saudi Arabia agreed to cut post $90 billion budget deficit and government employee salary cut. They realised that lower price of oil is going to lead Saudi Arabia in major financial crisis. Member countries will meet in Nov 2016 to decide which country will take the maximum hit.

The oil price shooted upwards post surprise outcome but it is not sustainable in my point of view.
By the time, member country will implement the cut, winter season will set in. It will give an opportunity to non OPEC countries to increase the production and grab the market share.

Russia already announced many weeks back that they are going to increase the production which will lead to a situation where the availability of oil will be in the market.

In a scenario, oil price goes above $60 per barrel then US based shell oil producer will start their production as at that price point they will easily make profits.

In my point of view, the bump in crude oil price is temporary and we will see downwards direction very soon.

Please consult your financial advisor before investing
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About Devendra Prasad

20 years plus industry veteran of domestic and international ICT domain with the expertise in Business, Technology, Strategy and Analysis. Specializes in forecasting impact analysis, trends and recommendations for Investments, Technology and Regulations.
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