When OPEC signed their historic deal to cut member production by
a collective 1.2 million barrels a day, the oil industry
celebrated. Investment would once again rise, the glut of oil in
land and floating storage which was reaching full capacity would
shrink and prices would start a steady climb upwards. Two months on
and the market is beginning to question how successful the OPEC
play has been.
Should traders equip themselves legally for a renewed rush to
storage? Will there be a renewed Contango with its storage
arbitrage? We look at what in-house counsel can do to prepare for
what could be a 12 month rollercoaster ride.
Scenario 1: The OPEC Plan succeeds
Let us assume that OPEC's plan comes to fruition. We should
start to see a period of rising but steadying price movement. The
Contango will dry up and storage capacity will become available as
production limits start to have effect. We describe below the
likely legal issues that would arise as a result.
