OPEC Oil Production "Freeze" Talk Will Have Similar Ending ... No Agreement

Takeaway: Target of Freeze Talk is sentiment not production. Saudi Arabia and Iran will not agree because the September timing is too soon.

Editor's Note: Below is a brief excerpt from an institutional research note written by Senior Energy Analyst Joe McMonigle on the resurfacing of OPEC oil production "freeze" speculation. For more information about our institutional research contact sales@hedgeye.com.

OPEC Oil Production "Freeze" Talk Will Have Similar Ending ... No Agreement - Oil cartoon 12.28.2015

"We’ve seen this movie before: in response to low oil prices, a few producers propose a production freeze designed to talk up crude prices but has no real impact on fundamentals.

According to recent press reports, Venezuela, Kuwait and Ecuador are again pushing a production freeze in response to the recent dip in oil prices. Since OPEC meets informally at the upcoming International Energy Forum (IEF) in Algeria on September 26-28, some market participants believe the Production Freeze 2 has real legs pushing prices higher on Monday.

However, we believe the sequel to the production freeze will end the same with no agreement in September. We remain highly skeptical that any meaningful agreement will be reached or that it changes the outlook for oil markets. 

  • First, the production freeze is not a serious proposal but designed only as a public relations tool to effect sentiment and try to establish an artificial price floor. 
  • Second, Saudi Arabia and Iran will not agree to a production freeze because the September timing is too soon."

Additional oil-related Insights written by McMonigle:

**For more information about our institutional research contact sales@hedgeye.com.