OPEC: Little chance of an agreement to freeze output - BBH

Research Team at BBH, suggests that the OPEC meets on June 2 and investors and observers recognize that there is little chance of an agreement to freeze output. 

Key Quotes

“While most producers have little spare capacity, the key remains Saudi Arabia.  On political and economic grounds, it cannot cede market share to Iran.  Moreover, the combination of Saudi Arabian influence and the cooling effect of US financial sanctions (as opposed to the embargo that has ended) are contributing to a more gradual recovery of Iranian output.

With oil prices near $50 a barrel, Saudi Arabia's strategy of squeezing out high-cost producers would seem to be working.  US production has fallen by around 500k barrels a day, but the other supply cuts have not been the result of lower prices and the Saudi strategy.  Libyan and Nigerian oil output has fallen due to domestic violence.  Canada's output fell due to forest fire and is already coming back online.   

The outcome of the OPEC meeting will have little impact on whether the Fed decides to hike rates in June or July.  The meeting is still important because it will be an opportunity to see/hear Saudi Arabia's new Energy Minister Khalid Al-Falih.  He replaces Ali al-Naimi, who had the position for the past 20 years.  Al-Falih is reportedly a close confidant of Prince Mohammed, who has emerged as a key figure driving the Kingdom's policy.”