<\/p>\n<\/a>Energies<\/u> –
\nI\u2019ve noted for a while now that the market has pretty much baked in an extension of the OPEC production cuts beyond this month and I wondered aloud how OPEC was hoping to stir up added price gains considering this was priced in.\u00a0 This morning we see the next phase of this effort, with both Saudi and Russian officials saying the production cuts could be extended beyond this year.\u00a0 OPEC is now essentially trying to keep these production cuts \u201copen-ended\u201d in an effort to support prices, but as you can see from looking at the quotes this morning the market seems relatively unimpressed.\u00a0 For starters, there is the question of how effective this will be considering production is likely to increase in Nigeria and Libya from this point forward.\u00a0 Additionally, Iran would seem unlikely to be willing to continue with these restrictions as they continually cite goals to increase their production capacity.\u00a0 On top of that, Kazakhstan hasn\u2019t even really put in much effort to stick to their production cut agreement and most expect production to expand there as well.<\/p>\n
The financial state of the Saudi government is also in question.\u00a0 How much longer can the government continue to keep this up?\u00a0 Note the chart below (source:Bloomberg), showing that despite the gains in price since the production cut agreement went into effect, the Saudis are still seeing lower revenues due to lost market share.\u00a0 Mix in the fact that prices remain in a range that allows for expansion of US shale production, and this doesn\u2019t seem like a winning scenario for the Saudis.<\/p>\n
<\/p>\n
Please note this is just a small sampling of commentary available to clients.\u00a0 Please visit \n\t\n\t\n\t\n\n\n\n\n\n\t\n\t\n\t\n