OpEd: OPEC coalition still playing production cut poker

(FinancialPress)—OpEd—In high stakes poker, the ability to read your opponent decides who may win or who may lose. In the game that oil producing nations play today that high stakes game is being played.

Kuwait is the player we focus on today. In an article published in Platts today Kuwait’s oil minister Essam al-Marzoug stated they are not ready to discuss extending its production cut agreement beyond its March expiry.

Each of the Middle Eastern countries has spending they incur supported by oil exports and any reduction puts their economies at risk. Economies at risk means possible long term pain to the population.

Let the game ratchet up as the balance between cheating and being caught cheating is being played.

Kuwait’s economy has done well by reports on the matter. The issue was reported in UPI and they are enjoying a 3% GDP growth. Oil production is down, but not at the level agreed to.

Iraq has become more covert in their cheating with volumes being sold “off the balance sheet” so to speak (see quote).

Russia may be cheating, but their system allows for much more to go unsuspected.

The fact equity in ARAMCO was sold earlier this year suggests that Saudi is trying to keep the public spending intact while not giving away control of the situation at home.

Of course the United States is not part of this coalition and as a major consumer is pivotal to the equation.

Interruptions in supply have historically impacted pricing. Weather in the Gulf Coast has put a temporary kink in US’s production and refining. Hurricanes do have a way of interrupting things. Tension in the Middle East is always there. In addition other global hot spots can come into play as well.

In this high stakes game that keeps stability in numerous economies humming along, the biggest question is who will blink?

Pass the popcorn because this could get interesting.

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