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Durudarshan - Investment Analysis

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Some production cuts proposed by Saudi Arabia....

Posted on January 28, 2016 at 11:37 AM Comments comments ()
If the Saudis are proposing production cuts, as reported by Russian sources, this will be good news for all the Oil producers.   It will be especially welcome news for Venezuela, whose economy has suffered so badly with the plunging Oil price, unable to import due to lack of foreign exchange and other facilities, seeing ques outside supermarkets which are for the most part not as well stocked as before the crisis.  All the OPEC nations will feel glad that someone has seen common sense, and are not throwing away this valuable resource in an effort to wear the others down.  Producing more in the face of a falling price was just reckless.  While pretending there was no panic to restore the price to an economic level, some of the Oil producing nations have seen their reserves badly depleted.  Times are remniscient of those in the 1990s when economic growth was minus 8 percent for some nations, resulting in a world slowdown.  Thank God, some people have seen common sense just in time to avoid such a painful scenario just a short time ahead....if they actually implement the cuts they are proposing.

They are proposing each of the Oil producers cut their production by 5 percent.  This should not be difficult, indeed it is the best solution, the world having run out of the empty storage to take any more Oil. 

In the midst of this, I would doubt whether the $25 a barrel price will be reached.  If it does, it may hit there only momentarily, as the Iranians try to re-establish their foothold substantially in this very lucrative market.  They were I believe sardonically teasing the markets that it may reach there, but I see very slim hope of that.  Patience and wisdom will tell them that they can restore their fortunes by keeping their production tight, so that the glut can be used up, and bought up quickly.  China is about to kick up their production and growth, seeing all commodities reach near bottom, or they may be diversifying into Oil merchants, recently buying up most of the available supplies.

The production cuts and a rising Oil price will be good news for everybody, so interdependent are all the nations today.  Good news for each and everyone is the best news for everybody. 

Russia is taking a leading role in trying to help re-establish peace in Syria, as well as open to implementing all details of the Minsk agreement with Ukraine.  In due course, the Western block will lift sanctions against Russia, as the U.S. Secretary of State John Kerry  has optimistically suggested.
And what would be better than Russia trading normally with all other nations, and restoring their prosperity?  There is that goodwill in the world.  I pray Mr Kerry's hopes will be fruitful.

All this news seems to put an optimistic tone to the global future in the near term.

Kind regards,
Duru-darshan

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