Magazine article The New American

Agreement to Cut Oil Production Fades, along with Crude Prices

Magazine article The New American

Agreement to Cut Oil Production Fades, along with Crude Prices

Article excerpt

Following a brief meeting of oil ministers from Russia, Saudi Arabia, Qatar, and Venezuela on February 16, the Russian Ministry of Energy stated that the four countries "are ready to freeze oil production at January levels if other producers join this initiative." The announcement caused stocks and the prices of crude oil to jump for joy. Dow futures were up 250 points and NYMEX crude jumped two dollars a barrel.

Reality set in shortly thereafter. If prices of crude are to see any sort of permanent rise, what the market needs is a cut in production, not a continuation of production at record levels. Second, any agreement is contingent upon getting all the other OPEC cartel's members to get in line. Neither Iraq nor Iran is likely to go along. Iraq has been merrily pumping for all it's worth, ignoring any agreement it might have made in the past to stay loyal to the cartel. And Iran has pointedly said that it will have no part of any agreement until its own production is back to pre-sanction levels. …

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