OPEC-Russia Agreement To Freeze Production Is Meaningless

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    Qatar’s Minister of Energy and Industry Mohammed Saleh al-Sada (center), Saudi Arabia’s
 minister of Oil and Mineral Resources Ali al-Naimi (left), and Russia’s Energy Minister
Alexander Novak attend a press conference Tuesday in the Qatari capital Doha. Energy
   giants Saudi Arabia and Russia agreed to freeze oil output to try to stabilize the market if
other major producers do the same, Qatar’s oil minister said.

Freezing oil production announced Tuesday by some OPEC members and Russia is not a cut and is largely meaningless. It does not include Iran and Iraq. Obviously only includes Saudi Arabia, Russia, Venezuela and Qatar.

What is it really? A largely empty and cynical gesture that almost certainly will lead to another price increase "head-fake" that will not last. This will strengthen the OPEC income temporarily.

The oil minister of Saudi Arabia's al-Naimi said the agreement to freeze the production levels of January was "dynamic and preliminary," meaning that nothing will happen unless other countries join the agreement.

It is important that Russia was involved. It is more important that Iraq, whose production increase is the largest in OPEC and Iran, whose renewed export will be the largest increase in OPEC, were invited to participate.

Currently, it is not clear that anything substantial will come out of this communication, although any movement at all should be taken as somewhat positive.

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