OPEC unlikely to throw in the towel despite losing its pricing power – Commerzbank | Shipping Herald

OPEC’s limited impact on oil prices since securing a landmark deal to curb oversupply shows its dwindling influence in the energy market, according to the head of commodities research at Commerzbank.

“The fairly short-lived effect of production cuts on oil prices shows that OPEC’s market impact via ‘supply control’ is very limited. We have been pointing out for years that OPEC has lost its ‘pricing power’,” Eugen Weinberg, head of commodities research at Commerzbank, said in a note.

“Even so, OPEC is unlikely to throw in the towel already and make another U-turn, but will extend the agreement instead,” Weinberg added.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, agreed to slash output by almost 1.8 million barrels per day in the first half of the year. The historic deal was struck in an attempt to remove a supply overhang which has depressed prices to less than half their 2014 highs.

OPEC appears poised to extend supply cuts beyond the middle of the year when the 13 member cartel meets on May 25 in Vienna. However, many analysts and investors have grown increasingly cynical as to whether a prolonged period of production cuts could spur a rally in oil prices towards the $60 a barrel level earmarked by de-facto leader, Saudi Arabia.

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OPEC unlikely to throw in the towel despite losing its pricing power – Commerzbank | Shipping Herald.