To Cut or not to Cut: The Dilemma Facing OPEC

Since the early 1970s, OPEC has been central to understanding the dynamics of oil prices. With the shift to the futures market for oil price determination, OPEC has also become important in understanding the changes in the shape of the futures curve and expectations about changes in long term oil prices. At this critical juncture, it is important to assess OPEC actions during the last cycle as events in the past three years or so highlight some interesting features of OPEC behaviour. These observations help us identify the channels through which OPEC interacts with the market and understand how OPEC is likely to react to the current slide in oil prices.

By: Bassam Fattouh

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