New OPEC Meeting Sparks Hopes Of Production Cuts

Crude oil reversed gains in the Asian session on Tuesday falling 30 cents.However, Oil prices bounced and is trading at 43.21 and Brent oil is at 45.50 after a sudden rally on Monday. OPEC announced plans on Monday to hold an unscheduled meeting late next month in Algeria. Non-OPEC member Russia, the world’s largest oil producer, opened the door to joining the “informal” meeting. But of course this is not the first such meeting with nothing occurring.

All of this is fueling speculation that major oil producers could announce moves to stabilize oil prices, which recently fell back below $40 a barrel from over $50 two months ago. OPEC has been pumping oil at a ferocious pace the last two years, aiming to steal back market share from the U.S.

Confirmation of an OPEC meeting, to be held on September 26 to September 28, was enough to send oil prices soaring 3% on Monday to $43 a barrel.

Mohammed Bin Saleh Al-Sada, the president of OPEC and Qatar’s energy minister, insists that the oil price slump is “only temporary” and the market remains on track to recover. Recently-elected President of the Organization of Petroleum Exporting Countries Mohammed Bin Saleh Al-Sada expects to see oil demand rise by the end of this year.

According to the executive, who is also Qatar’s Minister of Energy and Industry, the recent decline in oil prices and the current market volatility are simply temporary.

“Higher oil demand is expected in the third and fourth quarters,” Al-Sada said according to a statement released by OPEC.

CNN Money reported that Saudi Arabia, the powerful leader of OPEC, has been forced to usher in severe budget cuts that have resulted in a wave of job cuts. Last week, India was forced to come to the rescue of thousands of its starving citizens in Saudi Arabia who lost their jobs and were stuck in migrant camps with poor conditions.

Russia’s economy has been hit by a double whammy of cheap oil and sanctions from the West. Russia has even cut its defense spending despite tensions with the West.

Yet Alexander Novak, Russia’s energy minister, said he doesn’t think the “prerequisites” for a production freeze are there yet, according to Russian news agency Sputnik. However, Novak said a freeze could be needed if prices fall further and he signaled a willingness to discuss the matter in Algeria with Saudi Arabia.

On the US side of the equation it declining jobs in the oil industry, but last Friday’s nonfarm payroll report showed huge growth in jobs with the layoffs from the oil industry being easily absorbed. Since oil prices began to fall in mid-2014, cheap crude has been blamed for 195,000 job cuts in the U.S., according to a report published on Thursday by outplacement firm Challenger, Gray & Christmas.

It’s an enormous toll that is especially painful because these tend to be well-paying jobs. The average pay in the oil and gas industry is 84% higher than the national average, according to Goldman Sachs. The cuts have occurred at a time when many other corners of the American economy have been adding jobs.

The good news for laid-off oil workers is that some think the pendulum may have swung too hard, creating a talent shortage when drilling activity eventually rebounds. Goldman Sachs predicted the oil and gas needs to hire between 80,000 and 100,000 people by the end of 2018 just to keep up. The oil industry may need to pay up to lure workers back to the oil patch.