OPEC is an ‘irresponsible racket', doomed by oil market speculators

On Wednesday the 14 members of OPEC held a meeting in Algiers and unexpectedly agreed to cut production for the first time in eight years, Sputnik reports.

With Saudi Arabia and other members of the cartel struggling to balance their budgets due to lower oil revenues, OPEC decided to completely reverse its November 2014 decision not to impose a cut in oil output despite plummeting oil prices amid a glut of shale oil. The price of oil rose by 5.9 percent on the day OPEC's agreement was made public, and continued to increase the following day, by another 1.1 percent. However, on Friday it declined by 0.4 percent, with the price of Brent crude settling at $49.06 per barrel. Konstantin Simonov, director of Russia's National Energy Security Fund, told Vzglyad that OPEC's announcement is hard to believe, given that the cartel has not kept its word after announcing previous agreements.

"I don't really believe OPEC. They have broken their quotas so many times. OPEC members are extremely undisciplined, and there is a complicated relationship between Iran and Saudi Arabia."

"Some Sheikh might say that this is just a Filkin Charter. Or the Arabs could say that they are fulfilling the agreements but actually they are just continuing to produce as before. They have already accustomed us to the fact that this is not a serious organization, but some kind of racket which does not take responsibility for what it says," Simonov said.

Simonov declared that announcements about cutting production are actually irrelevant to the market, which is driven by the behavior of market speculators.

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