OPEC Deal and the U.S. Stock Market
For the past few years, the strategy of OPEC has been to do nothing while Saudi Arabia pumps oil as fast as it can into the market. The idea was to cripple, or drive out of business, various U.S. oil businesses that depend on more expensive extraction methods such as fracking. With prices low, many of those businesses did indeed go into hibernation and most new drilling was curtailed. However, that still leaves tons of capacity sitting idle, waiting for higher prices before flipping the switch back on. OPEC Deal It has become apparent that overproduction will not drive out U.S. oil businesses. It seems a strong U.S. economy, plus a more disciplined approach to lending and spending has left most American producers able to hold out for higher prices for longer than the cartel may have hoped. As a result, the cheap oil is actually causing more trouble for oil producing countries like Saudi Arabia that depend on oil production to fund their government. So, for the first time in over 7 years, the 14 OPEC countries have reached a deal to reduce production. The new deal calls for a reduction of 1.2 million barrels of oil per day, with …