We’re Missing the Point on Oil

Romano Sala Tenna

Katana Asset Management

The problem with oil is not that it is ‘suddenly’ in oversupply. Oil has been in oversupply for the best part of 7 decades and certainly since the formation of OPEC in 1960. And oil is likely to remain in oversupply for decades to come. The current pronounced weakness in the oil price is an attempt by Saudi Arabia (predominantly) to eradicate existing high cost production, slow the onset of new projects and pressure OPEC and non-OPEC nations such as Russia (ROPEC?!) into greater supply-side discipline. As OPEC met for the 166th meeting in late November 2014, the oil price was already under pressure. But Saudi Arabia chose to...further increase production! In fact, Saudi Arabia’s recent production is at an all-time high, surpassing its previous record achieved in 1980. Analysts that attribute the current oil price weakness to the ‘breakdown of OPEC’ are poor students of history. OPEC has been down this path before and will persist until it has inflicted as much pain as it can on competing oil producers, or until it can bear no more pain itself.

Romano  Sala Tenna
Portfolio Manager
Katana Asset Management

Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment