EMEA News
OPEC Willingness to Talk Cuts Either "Poppycock" or Evidence That "Hell Froze Over"
Despite the resurgence of oil prices that saw 12 percent gains on Friday following claims that the Organization of the Petroleum Exporting Countries (OPEC) is close to discussing cuts with non members, analysts warn that the rebound is based on "false hope."
That is the contention of Michael Cohen, head of energy commodities research for Barclays, who told CNBC "anytime we see these kinds of headlines, they result in this kind of rapid change in the price."
He added that there was too much distrust between Saudi Arabia and Russia for any meaningful cuts to be made, even if talks do happen.
Oil prices began rebounding last week after a Wall Street Journal journalist paraphrased Suhail bin Mohammed al-Mazrouei, energy minister for the United Arab Emirates, in a subsequently criticized tweet as saying that "OPEC is ready to cooperate on a cut."
John Kilduff, founding partner at advisory firm Again Capital, believes the market's reaction to the minister's remark is overblown; he also thinks Saudi Arabia won't relent until it has inflicted enough pain on U.S. oil producers, and that oil will fall to $18 per barrel before the market rebalances.
Matt Smith, director of commodity research at ClipperData, told MarketWatch that the minister's declaration "is more likely to be poppycock than progress" and wondered what the incentive would be for OPEC to play ball with non-members in light of the fact that its strategy to debilitate the U.S. oil patch is working and OPEC production is set to rise even more in coming months.
However, Phil Flynn, senior market analyst at Price Futures Group, provided a somewhat more optimistic outlook with his observation that the UAE was "saying a month ago a cut was going to be over their dead body, basically; well, maybe hell froze over."
Last week Ship & Bunker reported that Goldman Sachs Group Inc. said it would not be a surprise if oil dropped into the teens before a rebalance occurs.
