OPEC Flinched First

You probably haven’t heard the name Sheikh Rashid bin Saeed Al Maktoum before today. 

He was the first vice president of the UAE after it was founded, he served as its second prime minister, and also ruled Dubai for 32 years. 

Although you may not recognize the name, there’s a good chance you’ve heard a quote commonly attributed to him that he said roughly 57 years ago:

“My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, but his son will ride a camel.”

Its meaning is easy enough to understand. He supposedly said it after oil was discovered in Dubai. Whether he’s the true author behind that catchy quote or not, or if it came from another member of the Dubai Royal Family, is still in question. 

However, we’re quickly moving past Mercedes and Land Rovers. 

And if things continue going the way they have been recently, it’ll be camels all the way down for young OPEC princes… okay, maybe they’ll have to settle for a few Teslas. 

Last week, we talked about the fateful decision that OPEC+ was about to hand down at its latest meeting. 

Make no mistake, dear reader, this was a crucial decision that had to be made. Oil prices have been under intense bearish pressure since the end of September, and even the geopolitical volatility that had accrued since the October 7th attacks has waned. 

Adding insult to injury, all year there has been a fierce war of words waged against OPEC. 

Recently, the IEA’s Chief Fatih Birol vilified the fossil fuel industry, saying that oil producers face a “moment of truth” and had to decide between exasperating the climate crisis or finally make the leap to clean energy. 

If you recall earlier this year in April, Birol went so far as to preach that NO new oil and gas fields should be approved for development. In the IEA’s professional opinion, existing fields should be enough to satiate oil and gas demand until the full transition to clean energy can be made. 

Let’s be fair, if that truly happened and the world immediately halted all oil and gas exploration, it wouldn’t just be those young OPEC princes riding camels. 

All of us would be looking to buy saddles. 

In case anyone might’ve forgotten, roughly 60% of the world’s electricity is still sourced from natural gas and coal. 

But hey, what’s a good war of words without ridiculous hyperbole, right?

So like I said, this meeting was OPEC’s chance to fire back with more than words and prove, once and for all, that they’re in control of global oil prices. 

Unfortunately for them, OPEC’s resolve withered like a limp noodle. 

Instead of showing strength, the decision was to add a small amount of more voluntary cuts to the 1.5 million barrels per day that the Saudis and Russia already have in place — another ~700,000 and some odd barrels. 

In total, the group has pledged to voluntarily cut a total of 2.2 million barrels per day from output. Even the announcement that Brazil was joining the crude cartel next year wasn’t enough to move the dial. 

Apparently there’s more internal strife within OPEC+ than they’d care to admit. Angola even came out saying they’ll probably break their share of the cuts anyway.

The weak gesture sank crude prices, pushing WTI below $73 briefly. 

After all the fire and brimstone that has been thrown around in the media, you have to wonder what would make OPEC flinch like this. 

Of course, an even bigger question that should be floating around everyone’s head is: What will it take to push oil higher?

I think the answer will surprise you, and next time we’ll dive into what may put the bulls back in the driver’s seat. 

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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