Energy: What’s Been Happening in the Energy World this Past Week *** INDUSTRY FOCUS *** | Summary and Q&A

TL;DR

OPEC has decided to remove production quotas in light of low oil prices, as a reduction in production is unlikely to raise prices significantly due to non-OPEC producers still cutting production.

Key Insights

• 👥 OPEC's decision to eliminate production quotas reflects the differing agendas and struggles within the group.
• 💇 The smaller OPEC producers are struggling the most and were in favor of cutting production.
• ✋ OPEC's decision puts pressure on higher cost producers like US shale producers.

Transcript

opec decides to do away with the production quotas they were ignoring any way on this energy edition of Industry focus greetings fools I am Sean O'Reilly here at fool headquarters in Alexandria Virginia it is thursday december thames 2015 and joining me in studio to talk all things energy and industrials is taylor muckerman and tyler crowe guys the... Read More

Questions & Answers

Q: Did OPEC consider cutting production by 5%?

It is unlikely that OPEC considered cutting production, as they decided that a reduction in production would not significantly impact prices, especially if non-OPEC producers were also cutting production.

Q: Why didn't the smaller OPEC producers want to cut production?

The smaller OPEC producers, such as Venezuela, were struggling and wanted the larger producers to cut production. However, they would not be able to achieve as much of a cut as the larger producers, making it ineffective.

Q: Why doesn't Russia want to cut production?

Russia is producing oil at record levels and believes that even if they cut production by 5%, they would still have a substantial amount of oil to capture market share.

Q: What is the impact of OPEC's decision on higher cost producers like US shale producers?

OPEC's decision to maintain high production levels is aimed at putting pressure on higher cost producers like US shale producers. The hope is that these higher cost producers will be forced to reduce production due to low oil prices.

Summary & Key Takeaways

• OPEC has chosen to eliminate production quotas, indicating that they are not planning on cutting oil production.

• Some members of OPEC, such as Venezuela, were struggling due to the low oil prices and were in favor of cutting production.

• The smaller OPEC producers wanted the larger producers, such as Saudi Arabia and Iraq, to commit to cutting production as well.

• OPEC's decision reflects the fragmented nature of the group and their differing agendas.