The last time OPEC (and Non-OPEC) member nations sat down to attempt a coordinated increase in oil prices by cutting production they succeeded… for about three months. Ever since then, oil has been on a gradual declining path, boosted by a surge in US shale output and declining global demand, with WTI recently even sliding sliding below OPEC’s implicit price floor of $50/barrel. Which is why on 25 May, after the failure of the first 6 month production cut, the same nations will try the same exercise, this time looking to cut output for 9 months, and hoping for a different outcome. At least that is the general expectation.
Bank of America’s Francisco Blanch has released a note previewing this week’s OPEC meeting titled “OPEC: extend and pretend“, and which boils down to the 3 choices faced by OPEC: maintain, curb, or hike output.