Let's address this straight away. Clearly OPEC does not control more than a third of global supply and the world is currently consuming 96.5 million barrels per day (bpd), of which OPEC produces circa 31.8 million bpd.
However, last year's historic production cut also included a contribution from the Russians , who produce just under 11 million bpd, and sundry other non-OPEC players. This gives the producers serious sway on production if compliance is good, and compliance has by and large been pretty good.
So the question is why hasn't the extraction of 1.8 million bpd off the market actually produced the goods for OPEC? Why aren't prices in the more desirable $60 to $65 per barrel level, rather than languishing around $48 to $55? And why aren't record levels of global inventories being scythed? Surely such aggressive cuts should have produced more results?
There are many obvious reasons for these and other key questions over the strategy. In answer to the conundrum of stubbornly high inventories, the fact is OPEC has once again underestimated the response of shale in the U.S. to ramp up production on the back of the merest sniff of higher prices given that U.S. production costs continue to tumble.