The OPEC meeting came and went without much trouble. But although market analysts and the media assumed that a recovery from the current level of production cuts was about to happen, OPEC surprised us again.
Saudi Arabia had hinted before the meeting that the cartel was likely to roll out the cuts when it pushed for a rethink of its oil demand projections for the rest of the year, which it considered too high. He also called for “caution” in this unstable market. This suggested that Saudi Arabia believed that the demand for oil was not as high as they had predicted and, therefore, there may not be enough space for members to increase production.
But that proved not to be the case. Given the global pressure on the group – both from the United States and India – to supply more crude oil to the market, the result may not be so surprising. Saudi Arabia has denied that the pre-meeting call with Washington has anything to do with the outcome of the meeting, but we believe that the media is discrediting the amount of influence that interaction has had. To this end, Saudi Arabia raised no objections to a gradual increase in production during the OPEC meeting and pointed out that domestic demand would increase during the summer months and that an increase in production may be necessary.
The OPEC meeting was quick on Thursday. Saudi Arabia began the meeting with a veiled threat that it would decide on the fate of its own voluntary production …