OPEC, the intergovernmental body that coordinates and stabilizes global oil markets, is expected to convene on Friday for one of its semi-annual meetings. There is speculation that OPEC might undo a deal struck early last year to limit crude production. That agreement aimed to keep oil prices from falling too low in the wake of explosive production out of the United States due to widespread adoption of fracking techniques.
“Their goal has been reached,” Smith says. “They’ve tried to cut inventories on a global basis back in line with this five-year average. That was a stipulated goal, and that appears to have happened.”
With the Trump administration slapping sanctions on Iran, Saudi Arabia could be dealing the country a double blow.
“It’s really a double whammy for Iran,” Smith says, “from the perspective that because sanctions are being placed on them, they’re not going to be able to export as much, because they probably won’t be able to send crude into Europe. And at the same time, Saudi Arabia is talking about putting more oil onto the market. So as Iran cuts back by 500,000 barrels a day, something like that, Saudi is talking about filling that gap there. So it really is kind of rubbing salt into the wounds.”
One might think that President Donald Trump would embrace a move that pressures Iran, but the president took to Twitter to voice his displeasure, saying, “Oil prices are too high, OPEC is at it again. Not good!”
“The logic seems to be that he’s pointing fingers at OPEC here to say that they’re the ones that have lifted prices,” Smith says about the president’s tweet. “But really the reason that we’ve had a decent rally of late is because of sanctions being placed back on Iran.”
Smith says Trump’s tweet is meant to shift the blame away from his administration. So how could the upcoming OPEC meeting affect businesses in Texas?
“We could see prices ease a little bit lower because of this,” he says, “but shale country is looking pretty good at the moment.”
Smith says U.S. oil production is poised to hit 12 million barrels a day next year.
Written by Josue Moreno.