OPEC is happy...For now.
But I really don't know why they should be.
For the first time since 2008, OPEC cut production.
While the meetings in Algiers finished up yesterday with a lacklustre arrangement for fellow OPEC members to institute a "long needed" cut to production, what will it mean to the oil markets?
In an unstable world still ever dependent on oil, people can be quick to forget why oil prices have stayed low for so long, and why OPEC is hoping beyond hope that their fellow members will be happy with instituting a million barrel a day cut.
Not all OPEC members are happy with cutting.
Two OPEC member countries, namely Libya and Nigeria have to be upset with a quota that has them wondering why they have to put up with part of this million barrel a day cut in the first place. Both countries are trying to recover from instability and revolution and the last thing they possibly need is a cut to production that would hinder any recovery to their torn economies.
Nigeria, previous producers of almost 2.7 million barrels of light, sweet oil per day, is being asked to shoulder cuts while still recovering from a low output of close to 1.5 million barrels.
Libya, producers of almost 1.5 million barrels a day prior to their post-Ghadafi revolution, have only managed to scrape up a 300,000 barrels a day output and are hoping to return to full operation in the coming months.
This not the only sign that things may not go well on the oil front...
In recent months, in spite of lower oil prices, the US domestic oil industry has shown itself to be resilient in the face of low oil prices. A quick look at the numbers of rigs returning to the field is a sure sign that, if oil prices do indeed rise, their return to the fracking fields in the US Eagle Ford, Marcellus and Bakken fields are a sure bet.
Don't count out the response of US domestic response to fill in the role of a hole created by an OPEC "knee-jerk" response to lower oil prices.
Keep in mind also that any OPEC-instituted cut in production has never worked when it comes to the final read on output. OPEC has a history of over-producing and under-reporting oil production figures, so there's no reason to expect them to change dirty habits.
The markets should know this...
They're just not saying so yet...
Gone are the halcyon days when OPEC used to institute a cut and the markets saw a meteoric rise in oil. Most times saw sharp, sudden increases to oil that were sustained and helped support oil to where it hit record heights.
That was before the days of the frack and the advent of "democratic oil". Now everyone has it, if they have a shale resource and everyone can respond to fill that oil hole.
OPEC knows this, but they forgot this very important fact.
OPEC did succeed in two things yesterday: OPEC managed to put out the sure signs that they lost the fight for market share and the fight to retain control of the price of oil.