February 22, 2016

OPEC nations' proposed "oil freeze" won't work. Here's why.

Holly NicholasRebel Commentator
 

Saudi Arabia's plan to flood the market with an oversupply of oil has backfired. 

The attempt was initiated to protect the Saudi market share and force rapidly growing, high cost producers out of the market, mainly those doing business in the US shale boom. 

Instead of putting the fire out, the United States (which consistently touts the climate change narrative), increased production, becoming the world’s largest producer and contributing further to the oversupply of oil on the market. 

(Has anyone calculated the carbon footprint on that?)

Although the deal is up to, in large part, OPEC producing countries and governments, the Democrats have remained relatively quiet.  And there’s a reason for that:  business is booming in the United States and they are a country on their way to energy independence. And a shaky oil market reinforces both the environmental stigma attached to the oil and gas industry and the mindset that depending on fossil fuels is unsustainable.

The Obama Administration is comfortable in a world that has accepted the religion of climate change – so why interfere with the narrative?  

Here in Canada, it is more of the same from the new Liberal government. The catastrophic job losses in Alberta and collapse of the energy sector set the stage to project talking points on the oil and gas rollercoaster ride that results in Canada’s desperate need fora green future. 

The excess of oil on the market led to a price decrease in oil of over 70% since the decision was announced by the Saudi’s in November of 2014, causing recessions, record levels of unemployment and diminishing profit margins across the globe. 

And due to the economic losses of the major oil producers, they are ready to make a deal, while hundreds of thousands are out of work and waiting in the food bank line-up. 

Here's why this deal won’t work:

Further to an announcement on February 16 calling to freeze oil production, Russia’s energy minister Alexander Novak has now stated that deals between major oil producers, including OPEC and non-OPEC producers, should be solidified by March 1. 

The Russian energy minister also stated that those backing the freeze contribute to 75% of the world’s exports. 

Countries supporting restricted production also say that they will freeze rates at January levels, which is suggested to take 1.3 million bbl/d off of the market. But freezing production in January won’t help things, since production was already at near record levels.

There is also one country that won’t commit: Iran. Despite chants of “death to America,” Iran’s major human rights violations and hostile form of governing, the US lifted sanctions on the country in January allowing a free pass to increase production and enter the market again. 

Iran's Deputy Oil Minister, Rokneddin Javadi, stated that Tehran plans to increase production to 700,000 bbl/d.  But Russia’s first deputy energy minister, Alexey Texler, says that even if Iran doesn’t reduce production, the negative effects of oversupply on the market will be removed. 

Currently, the supply of oil on the market exceeds demand by 1 million bbl/d and due to this, oil storage capacities are at maximum levels.  Add to this another 700,000 bbl/d of Iranian production and nothing will change.

Although Texler appears confident, it is very unlikely that a production freeze will fix the issue of oversupply on the market for a number of reasons, including freezing production levels at record level, increased Iranian production, along with oversupply and overstock of oil. 

This concoction of issues -- ones that those countries supporting restricted production seem to be overlooking -- simply will not close the gap between supply and demand. 

One can only assume that it will be a long road to global recovery if this is the only plan in the works.  

Comments
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commented 2016-02-24 23:48:21 -0500
Looking forward to that Holly. This stuff needs to be shouted from the roof tops. We are being had, and not just by our PM, Premier’s,(except Brad Wall) Mayors and enviro nazi’s .
commented 2016-02-24 00:23:41 -0500
Hi all, thanks so much for your comments, as always.

This story just keeps growing. I’m working on a piece about Saudi’s claim that Canada will need to leave the market. Stay tuned!
commented 2016-02-23 05:14:33 -0500
Canada’s dance along the thin wire requires preservation!
In light of global events..
Don’t think I would like to fill the shoes of Pappa Marianette chasing security where none is available.
T2 better earn those loafers and open wide in hopes the load he is about to swallow doesn’t choke him and the old brown eye doesn’t need any stitches!
commented 2016-02-23 05:14:32 -0500
Canada’s dance along the thin wire requires preservation!
In light of global events..
Don’t think I would like to fill the shoes of Pappa Marianette chasing security where none is available.
T2 better earn those loafers and open wide in hopes the load he is about to swallow doesn’t choke him and the old brown eye doesn’t need any stitches!
commented 2016-02-23 04:40:00 -0500
Thanks for your research Holly.. Hard work!
Bill Elder, I agree, but the dance T2 has undertaken wavers great doubt!
Makiavelli? Our best hope!
Serious doubts preside.
commented 2016-02-22 23:17:41 -0500
IF Obambie hadn’t given free reign to Iran it would be bad enough. Its depressing.
I’m going to hold onto Dr. Genius’s small ray of hope. That and surviving boy Trudeau’s term so we can build some pipelines, and cut off the Saudi pipeline, from the east coast. It is going to be a trying time for who knows how long though.
commented 2016-02-22 20:28:58 -0500
Hi holly. That was a good read.
commented 2016-02-22 19:14:59 -0500
Andrew – not a doubt in my mind that PM Selfie’s hatred of western oil is him carrying forward the agendas of the Laurentian elite (of which he is one by pedigree) to protect their interests in foreign oil and rail/shipping delivery systems. The climate scare and eco freak stuff is just the cover narrative.

I’d say Irving is playing both sides against the middle in partnering with TCP on the energy east project – then again they profit as a refinery/shipping terminus with discounted long term supply contracts.
commented 2016-02-22 18:54:12 -0500
This may be the nail in the Saudi Royal coffin. Saudi as a monarchist nation has be in decline for a while, when the money stops flowing in for the Royals to pay protection ransom to the Wahabi psychos, there will be civil war in SA and they will end up with some foamy hydrophobic ruling cartel like ISIS or ISIL in that Islamic fever swamp – at which point Israel will have a nervous paranoid finger on the nuke button..

Great! Get on with it, but bar the immigration gate from these craphole failed states, God knows we don’t want their psycho failed state politics and tribal warring over here – bad enough we had to put up with their troglodyte behavior/influence when we relied on oil from there.
commented 2016-02-22 18:17:05 -0500
Part of the low price of oil is the risk that it could drop to $20. If you remove that risk, which this deal appears to, then the price naturally goes higher, even if nothing physical has changed. It’s sent oil from $29 to $33 (14% increase).
commented 2016-02-22 18:07:41 -0500
I think that trudy is trying to ‘fix’ the deal that pete made with Lougheed in the 70s. I’m sure that pinhead thinks that he’s man enough to ‘show us’. Too bad, though, that reality isn’t in his wheelhouse.
commented 2016-02-22 17:52:41 -0500
Does nobody see that democratic countries are at war with Saudi Arabia 9/11 most hijackers were Saudi most of alquida were Sunni wahabiests from Saudi Arabia Isis is a wahabiest group now we are at an economic war next they are threatening Russia in Syria with nuclear weapons and a ground attack joined with turkey wake up peaple
commented 2016-02-22 16:14:30 -0500
This country is run by activists, gone are the times of politicians.
commented 2016-02-22 15:31:18 -0500
ELTON BRAUN commented 44 mins ago
Absolutely everything that liberals do involves lies and deception. And of course outright stupidity.

Trudeau wants Alberta oil dead in order to take his kickback from mideast oil that on shores in Maine and feeds eastern Canada.

Irving, Demarais, Dussault – all partners in the butchering of the Alberta oil industry.
commented 2016-02-22 14:45:24 -0500
Absolutely everything that liberals do involves lies and deception. And of course outright stupidity.
commented 2016-02-22 14:38:47 -0500
I think the OPEC countries would have to cease all production – 100% – and end up in the economic ditch – and hey I’m fine with that!!