Wry & Dry

OPEC cuts a deal on oil supply.

Briefly, readers will be aware that OPEC, the cartel of some oil exporting countries, have agreed to remove 1.2m barrels a day from global oil production.

Predicably, the price of oil rallied to above $50.

The success of the agreement, after two years of an oil-price free for all, is being put down to Saudi Arabia and Iran actually agreeing on something.  Readers will know that Iran is Shi-ite Islamist, Saudi Arabia is Sunni Islamist and they hate each other.  The deal broker was apparently Tsar Vlad, notwithstanding Russia's support for the government of Syria in the civil war.

The politics is fascinating.  But more relevant for now is the price of oil.  and what happens next.

To W&D's mind, the increase in price will cause American shale producers to ramp up production, thereby capping the price increase.  This may take a while.  And production cuts by OPEC are easily breached: Russia has the simplest task as much of its oil output is exported by pipeline. 

The volume of oil in pipes is more difficult to measure than counting oil tankers.

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