Is the 1987 number one hit single for the Pet Shop Boys, taken from the album Actually.
The OPEC & Non OPEC production cuts agreement over the weekend have pushed oil price above US$50 a barrel, and this ACTUALLY will be a boost to the RINGGIT.
But Market Watch says, that It's A SIN, and the production cuts are just going to play into the hands of the US shale oil juggernaut.
Read below, the Market Watch take on the Saudi Arabia led gambit, which looks like easing short term pain, for very long term PUNISHMENT :
The big news this week was an OPEC deal, finalized Saturday, to cut oil production. The deal finally made good on talk about a worldwide cut in oil production.
The deal resolves to remove about 2% of global oil production, with the Organization of Petroleum Exporting Countries’ member states cutting 1.2 million barrels of daily output and non-OPEC producers, including Russia, reducing 600,000 barrels daily.
The news earlier in the week that a deal had been struck had a big impact on the market, resulting in a roughly double-digit move for oil CLF7+1.26% , putting prices above $50 again for the first time since June.
Well, the bottom line is still the bottom line for big oil companies — and unfortunately, even a few extra bucks tacked on to a barrel of oil is not going to undo the past 10 years of pain.
Big Oil is stuck in a secular decline. And that means all investors should be wary of thinking a recovery in oil prices is a sign that oil giants like Chevron and Exxon are back.
A story of supply and demand
It’s a bit reductive, but the story of Big Oil’s troubles are all about simple supply and demand trends.
On the supply side, a global glut of oil has continued steadily for some time. According to the International Energy Agency, world oil supply has expanded from 90.4 million barrels a day in the beginning of 2013 to 97.2 million barrels a day as of the end of the third quarter of 2016.
That’s an 8% expansion in just three years, and occurring even as oil prices crashed from about $90 a barrel to current “highs” around $50.
It’s important to remember that a big reason for this surge in supply is the emergence of the United States as a global energy superpower, taking the top spot in global oil production in 2014 and only recently ceding it to Saudi Arabia.
The surge in U.S. production over the last decade is simply amazing, from just under 5.1 million barrels a day in 2006 to 9.4 million in 2015 — a surge of 84%!
It’s not just the percentage increase that matters, either. As you’ll recall from the OPEC deal, oil-producing nations are agreeing to a collective cut of 1.8 million barrels per day.
While that’s certainly substantive, it’s also about a fifth of U.S. oil output — which, if past is precedent, will only continue its upward trajectory.
That’s because shale-oil frackers have been resilient even in the face of falling oil prices, cutting costs and pumping frantically so they can sell enough crude to keep the lights on.
As the Wall Street Journal noted in September, oil production dipped by only about 535,000 barrels a day compared with 2015 despite “a wave of bankruptcies” in the space.
And furthermore, Goldman Sachs estimated at the time that firms would ratchet up production by year-end to bring overall output up year-over-year — and that was before this massive spike in prices driven by OPEC cuts.
Long story short is that the global oil supply remains massive, and even if OPEC tries to eat into the overhang with a modest cut, the U.S. is still pumping like mad.
That would be bad enough for supply-and-demand dynamics if we weren’t also in an era of weakening oil demand.
According to the IEA, global oil-demand growth peaked at a five-year high of 1.8 million extra barrels a day in 2015 but has steadily slumped to a growth rate of just 1.2 million barrels a day in global demand for 2016.
