Since mid-2014, oil production has been ahead of the demand for oil by 1-2 million barrels a day, resulting in prices falling by about 70%. Last week both Russia and OPEC announced that a production freeze will be put on crude oil in hopes to level out with demand. One oil trader, however, insists that freezing production at current levels wont actually reduce the glut, but will only add to it more. Also, many OPEC members are hesitant to freeze the production and are not fully committed so it is not a certain option. I think that a production freeze would ultimately not be beneficial because of the reason the oil trader gives which is that crude stocks in the U.S. are at a record high.
https://finance.yahoo.com/news/oil-prices-stay-weak-ongoing-004741624.html
I think it is wise to freeze production because it will most likely increase the oil price globally due to a smaller supply. Also with OPEC and Russia out of producing for a little but, this will make the market less competitive, which in turn will also increase prices. Interesting stuff, Tyler.
ReplyDeleteThe decreasing price shows the decreasing demand for oil products. I agree to freeze the oil production so as to match supply with demand of oil products and to reach the balanced status of oil markets. But considering the benefits that might be lost in the freezing process, I don't think most OPEC members are willing to do so.
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