Surprise, surprise a freeze in oil production is still on the table. Could it be that sub $40 oil is unsustainable. Really sub $50 is unsustainable since so many governments need the additional revenue. I pretty much laughed at all the empty and essentially empty threats from Iran, Saudi Arabia, Russia, Venezuela, et.al. to raise production through the roof.
Iran
The will raise output to 4MM bbl/day by June and then they will discuss freezing. In other words they will be happy to freeze at 4MM bbl/day. If it is all about not self sanctioning and turning this into a dog eat dog fight for market share why not keep on going after that. After all they said they sold oil at $6 in the 80's, $20 oil would be a windfall. If they can raise output 800k bbl/day in 6-8 weeks why not continue to add 300-400k bbl/day/month until nearly all US & Canadian output is shut in along with many other high cost producers. It's simple, it's about revenue. Also, Iran has more than likely been producing much higher levels for years and selling it on the black market, so they are now just incrementally claiming production increases for show. If Iran was really cranking out as much new oil as they claim Brent would not be in backwardation for June/July. Iranian oil would be more than plugging that gap, either directly or indirectly.
What does Iran really want? $70-$80 oil. This was their goal even after knowing the sanctions would be lifted and they would double output. So they want double output and double price.
Iran urges OPEC to cut oil output to raise prices to $70-$80
Bloomberg: Iran seeks $70-$80
Saudi Arabia
The Saudi's latest threat. We can raise output 1-2MM bbl day rapidly. They won't They want to build a $2T wealth fund. How will they do that with $20 oil when prices in the $30-$60 range cost them $150-$200 billion from their foreign reserves. Their $600 billion in foreign reserves would be gone in 2 years with $20 oil.
What does Saudi Arabia want and expect? $60 oil by end of 2016. Well that's easy to achieve just get on board with a freeze or event cut a little. They absolutely have to have $60 crude if they want a decent price for 5% of Aramco in the IPO offer they would really like to get done in 2017.
SABIC expects $60 oil by end of 2016
CNBC: SABIC expects $60 oil in 2016
Russia
After Doha Russia threatened to raise production if Iran and Saudi Arabia increased. Yah right. When crude was in the $30s many of their oil fields were not covering cash costs
What does Russia want? $45-$50/bbl is "acceptable"
http://www.reuters.com/article/us-russia-opec-freeze-idUSKCN0X30M0
Venezuela
Venezuela joined the post Doha empty threat party by claiming they would raise output if the Saudis and Iran did. Yah right. Prices were already low enough in 2015 that their output was in decline. Early this year when prices were in the $30s they couldn't even afford to import light crude to mix with their very heavy crude so they could export it. It's pretty bad when you can't even afford to keep the the business which is your very lifeblood alive by purchasing the necessities of said business.
What does Venezuela really want/need. $75-$80/bbl
Venezuela says $75-$80/bbl is a fair price for crude
The moral of the story is to load up on crude as it dips to about $40 over the next week or two, because a freeze deal in June is almost guaranteed. And US shale is locked into a multi year decline. It will take $60 oil just to get US production to stop falling with only 360 rigs working. And few rigs will come back until $60 is topped. As prices increase the Iran, the Saudis, and the rest of OPEC will stay ahead of the curve to claim any new demand for themselves, keeping the fear in US shale producers and their rigs on stacks.
$60 crude drives oil rig increases
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