A friend of mine asks me months ago, about OPEC and how much power they have on oil prices. The OPEC was create it in the mid 60’s with the concept of centralize and control the oil prices, the true is that once the OPEC had absolutely control over oil prices. This stared changing in 1987 when Ronald Reagan open Crude Oil and derivatives to the exchange markets, since then the markets forces has determine the price of Oil.
The OPEC once controlled 70% of global oil production, that today is down to 40%, its obvious that they are not what once they were. This week unveiled the strength of market forces over OPEC regulation measures. For the first time in 2 years the cartel unanimously approved 1.5 million cut production of barrel a day out of 26 million barrel a day of production, this couldn’t stop the debacle of Oil prices from 72 dollars to almost 60 dollars a barrel.
The biggest trader of Oil and Natural gas in the world Mark B. Fisher said once: “If you want to loss money trading oil you just have to listen and follow comments made by the OPEC”. The OPEC has a reputation of not following their production quotas. For example we have a unique situation; Venezuela needs oil between 80 and 90 dollars in order to follow through with their social agenda, Iran needs oil above 100 dollars to cut their trade deficit, but in the other side we have Angelia which is interesting in having the price of barrel on 30 dollars so they could make profit right away, and Saudi Arabia on 50 dollars since they have reserves for the next 60 years (60 billions barrels of Oil). After everything is said and done, OPEC members lie to each other, and never get to a mutual agreement.
You will probably will say with all this expose, Oil will go to the 40 or 50’s a barrel, well I do not think so, I believe after the elections pass, we will see oil spike again to the 80-90 ranges, because what we living right now is more fear and uncertainty than anything else, I am incline to believe that the same way Oil was overbought to the 147$, it has been oversold down to the 60’s, markets have forgotten that we still in a tight globally supply, and with any tiny little disruption of supply we could significantly changes on prices.