Editorial: Hostage Crisis At The Crude Club
“If nostalgia holds you hostage,
the ransom is the present.” - Khang Kijarro Nguyen
This weekend, the Organisation of Petroleum Exporting Countries (OPEC) and supernumerary members of “The Crude Club” meet in Doha to discuss a production freeze.
The United States - the world’s third largest oil producer in 2015 - declined to attend the meeting in the Qatari capital, as has an embattled Libya. The struggling North African republic has recently seen a deepening of the civil strife that menaces to split the country into its three constituent parts: Cyrenaica, Fezzan and Tripolitania.
A weakened dollar, heightened demand from China and the sheer hope that this meeting will see the oil cartel apply the brakes to runaway production, saw Brent crude hit a 2016 high of $43 a barrel. Based on recent historical precedent, how long-lived this resurgence will be is debatable.
The resultant torpor of the previous three OPEC gatherings has immediately led to yearly lows in the aftermath, and it is likely that inertia will entrain a similar reaction when trading resumes on April 18th.
In the improbable instance that OPEC announces a production cut, oil could see a trajectory towards $50 to $60 in the coming two months, dovetailing into the traditional price hike around the Summer speculation season. One factor that might turn that improbability into a reality is the fiscal fatigue heaped upon oil-dependent economies by a tenth successive month of sub $50 per barrel oil. The industry at large is hoping that extant economic pressures may supersede OPEC’s ostensible plan to rout prices but maintain market share.
As the countdown to Doha tick-tocks down, a beleaguered oil and gas sector is wondering whether its lot will be an ever-increasing ransom or plain and simple perennial Stockholm syndrome.