Quote:
Originally Posted by Traum
^^ Don't forget to include the suppliers as well. The Middle East is madly pumping all the oil it can get out from the ground. As the suppliers, I cannot understand why they are willing to sabotage themselves and their own profits.
With an oversupply of oil, the loonie is going to continue to suck.
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The reasoning on why OPEC doesn't cut supply is complicated, but it narrows down to the fact that it would do little to the long-term pricing of oil.
Before the advancement in oil extraction technologies, supply had huge influences on prices. But now that they solved the problem (no longer limited to vertical, or V/U shaped operations), reducing the supply on cheap/easy oil would simply fuel the development on expensive/difficult oil; something that OPEC is trying to avoid at all cost.
However, it's right that the there's an oversupply in the market. It's more similar to the case of aluminum, which used to be very expensive to isolate. Once cheap method came out, there was nothing to do to bring up the price again.