The Reports Of OPEC’s Death Have Been Greatly Exaggerated

After years of bickering, failed summits and pundits proclaiming its death OPEC, the organization/cartel of oil producing nations, finally pulled it together and made a deal to cut oil production in order to raise oil prices. Markets responded positively to the news with oil prices jumping 10% after the deal was announced. Previous deals had fallen apart due to a lack of trust between Saudi Arabia, which would have shouldered most of the cut in production, and Iraq/Iran who didn’t want limits to their production. Saudi Arabia and Iran have been engaged in a bitter proxy war across the Middle East. The deal is also unique because it includes Russia, a non-OPEC country that is also fighting its own proxy war against Saudi Arabia over Syria, forcing them to cut production as well. Over the past few years the price of oil had collapsed due to a glut from new suppliers, most notably US shale oil. Shale producers are exempt from the deal and will reap any windfall from a rising price.