Even in an age of cynicism, hope sometimes still triumphs over wisdom. Can you believe -- there were actually some investors who hoped something constructive would come out of the Doha conference of oil-producing nations. Fat chance!
In a market glutted with over-supply, everyone could see production cuts are necessary. Of course, there was no agreement on who would bear the pain of production cuts, which are nothing more than revenue cuts. Since Iran was held out of the market for so long by economic sanctions, they feel entitled to increase production, while other nations must cut production.
It is no coincidence that the conflict came down to Saudi Arabia versus Iran. They are the two dominant nations in their respective branches of Islam and very competitive with each other. Saudi Arabia is the Sunni leader, while Iran is the Shiite leader. For Saudi Arabia to accept the pain of production cuts, while Iran increases production, it would be seen as a triumph of Shia over Sunni. Apparently, nations can compromise on economic issues but not religious issues.
Happily, the stock market did not have its hopes too high. Even though oil has fallen 6% overnight, a huge drop, the futures market indicates only a half-point loss in stocks. There must be more than a few cynics on Wall Street?
In a market glutted with over-supply, everyone could see production cuts are necessary. Of course, there was no agreement on who would bear the pain of production cuts, which are nothing more than revenue cuts. Since Iran was held out of the market for so long by economic sanctions, they feel entitled to increase production, while other nations must cut production.
It is no coincidence that the conflict came down to Saudi Arabia versus Iran. They are the two dominant nations in their respective branches of Islam and very competitive with each other. Saudi Arabia is the Sunni leader, while Iran is the Shiite leader. For Saudi Arabia to accept the pain of production cuts, while Iran increases production, it would be seen as a triumph of Shia over Sunni. Apparently, nations can compromise on economic issues but not religious issues.
Happily, the stock market did not have its hopes too high. Even though oil has fallen 6% overnight, a huge drop, the futures market indicates only a half-point loss in stocks. There must be more than a few cynics on Wall Street?
