RE:RE:OPEC deal??Wrong ccautb0: fracking can't instantly increase production, and force oil prices back down. Based on historical growth, if the US drilling industry was running at full speed, the US can grow production by 1.2 mmbopd, per year. It takes time, investment, and work, to grow production.
OPEC has to control the price: Saudi's only role is to be the swing producer. They provide no other benefits to the world. In times of reduced supply, they need to produce more. In times of glutted markets, they need to reduce production, and stabilize the rest of the industry, as well as the world economy.
It takes alot more work to get oil out of fracturing wells, or oil sands projects, than it does to produce Saudi oil. The overall benefit to the world's GDP, is higher, if we are developing marginal quality oil, in a higher price regime.
So a real production cut, can easily take the price of oil to $60+. Then it will take time to get more oil onstream. Plus we are forgetting the fact that you can't just drill a well anyplace in the US, and fracture a well, and get oil. Certain areas have lots of oil, and they are being developed, while other areas have nothing. Once certain areas have alot of wells, that's it. There are infinite places to drill.
We'll see how this price recovery goes.