As any long-term investor knows, patience can pay, but it can be painful waiting.
Crude oil is close to a seven-month high as the world’s biggest club of energy producers meets in the week ahead. On Thursday, oil ministers from OPEC’s 13 member countries are scheduled to meet in Vienna to talk about oil production. The cartel is unlikely to reduce its oil output.
And why would it? Oil at $35 a barrel didn’t spook Saudi Arabia enough to cut production. The Saudis are the biggest producers in the group. Iran’s return to the global oil market after years of sanctions means it wants to cash in. Venezuela’s cratering economy needs all the petro-currency it can generate. The oil price rally this spring is all the more reason for OPEC countries to pump out all the oil they can. Especially as production by its biggest customer — America — has dipped to an 18-month low.
The energy minister of Qatar, who also is the head of OPEC, told the Associated Press this week a minimum oil price of $65 a barrel is “badly needed at the moment.” Previous efforts by individual OPEC nation’s to limit supply have failed even as oil prices have been cut in half in the past two years.
OPEC is a long-term investor. It is patient. OPEC’s big producers want to plug America’s energy ambitions and the threat U.S. shale energy poses. Innovation and technology cracked open fossil fuels locked in bedrock from Pennsylvania to the Dakotas to Texas. As that domestic supply flowed, prices fell. Dozens of those U.S. shale operators have declared bankruptcy. Less domestic supply has helped improve oil prices this spring.
All the while, OPEC countries haven’t slowed down. They’ve been prepared to be painfully patient.
Financial journalist Tom Hudson hosts The Sunshine Economy on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.