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11 Dec 2014
OPEC RIP? Not So Fast – BBH
FXStreet (Barcelona) - “Many observers have proclaimed the death of OPEC. This seems to be a premature judgment, and may reflect a misunderstanding of oligopolistic practices“ says, Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, as markets question OPEC’s strength after its decision to keep production unchanged.
Key Quotes
“The decision not to cut production is not a sign of the OPEC impotence as has been argued. If OPEC would have cut output, and lost market share as a consequence, would OPEC's future really been brighter?”
“OPEC is an unusual oligopoly. Its market share is less than 50%. There are important political and economic differences between members. Discrepancies of size, oil reserves and population are significant. Nevertheless, it has survived for nearly 55 years.”
“A few months ago, many thought oil prices could only rise. What Mark Twain said about buying real estate because they stopped making it seemed to apply to oil. We are running out of the stuff, was the claim of peak oil. The unexpected and stunning drop in prices has sparked a violent reversal of sentiment. Now observers have oil prices falling or lower for as far as the eye can see.”
Key Quotes
“The decision not to cut production is not a sign of the OPEC impotence as has been argued. If OPEC would have cut output, and lost market share as a consequence, would OPEC's future really been brighter?”
“OPEC is an unusual oligopoly. Its market share is less than 50%. There are important political and economic differences between members. Discrepancies of size, oil reserves and population are significant. Nevertheless, it has survived for nearly 55 years.”
“A few months ago, many thought oil prices could only rise. What Mark Twain said about buying real estate because they stopped making it seemed to apply to oil. We are running out of the stuff, was the claim of peak oil. The unexpected and stunning drop in prices has sparked a violent reversal of sentiment. Now observers have oil prices falling or lower for as far as the eye can see.”