Some analysts believe that OPEC is so worried about renewable energy that it is restructuring its internal system to prevent another major spike in the price of crude like the one experienced last summer.
The price of West Texas Intermediate crude oil at the New York Mercantile Exchange jumped $1.55 to $47.07 a barrel on Monday on the possibility that the Organization of Petroleum Exporting Countries will cut its production quota at its spring summit next weekend. The catalyst for the latest rumor about an OPEC cut was a statement by OPEC Secretary General Abdalla Salem El-Badri, who told reporters over the weekend that "all options" would be considered at the meeting. Exactly why oil traders are so beholden to these updates from El-Badri and his underlings is a mystery. The group is notoriously inconsistent, and is infamous for its internal infighting. History suggests that there are many better sources for information about OPEC than the OPEC members themselves. "If there is any consistency at all in OPEC's forecasts, it is a lack of consistency," said James Williams, energy analyst at WTRG Economics in London, Arkansas. In fact, there are some pretty stout reasons why OPEC may not cut production at its next meeting. First, OPEC's recent string of production cuts appear to have effectively halted the slide in global oil prices. Although the price of West Texas crude futures on the Nymex has taken a hit over the last two months, its volatility has been more reflective of the technical contango in the market rather than supply and demand fundamentals. Brent crude, which is more exposed to global markets and better represents recent international price movements, has been stable near $44 a barrel for more than six weeks. That is a pretty strong signal that OPEC's existing cuts have been effective.