Another month, another flight to Hamad international airport for 17th April after initial agreement to hold ‘upstream horses’ in February 2016. While it’s no doubt great fun getting back into the OPEC ‘masters of the oil universe’ routine, second time round, the stakes are rapidly rising in Doha given another supposed ‘freeze’ announcement would actually be read as outright OPEC / Russia failure without clear signals the market will see actual cuts. That opens a very complex can of worms for what’s at stake here. We’ll do OPEC politics first, followed by market ‘realities’ second. On both counts, timing is crucial. And bluntly put, OPEC couldn’t have picked a worse window for another ad hoc meeting.
Leading up to Doha, market expectations will inevitably grow for some kind of cut that’s likely to put a few dollars on the barrel. Ironic given this remains a classic case of OPEC / non-OPEC heavyweights ‘talking peace, but preparing for war’ in terms of longer term volumes strategies. Obviously it’s all bluff for now, but the fact Kuwait claims it can do 3.2mb/d, Iraq has inched up to 4.8mb/d, Venezuela is holding firm at ‘2.6mb/d’, while Russia is full steam ahead at 10.9mb/d serves as a reasonable proxy for where everyone is likely to go in a low price environment; volumes plays. Iran has certainly made clear it’s insisting on pre-sanction production levels before it’s even willing to sit at the OPEC table. Nobody was ever realistically going to hold that against Iran given market problems everyone else has got themselves into this far down the line. But in the interim, the key space to watch on 17th April is whether the market’s been asking all the wrong questions over cuts to date.
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