It’s one of the biggest stories in the world.

After dipping to a low of $39.26 in August, oil rallied to a recent high of $51.19, on hopes that OPEC and non-OPEC producers can come to an agreement to curb oil production at its November 2016 meeting.

Even Russian President Vladimir Putin has said the country was ready to join OPEC efforts to reduce oil supply.

There’s just one problem with Russia’s announcement.

The country’s energy giant, Rosneft said it would not cap oil production. 

Instead, the company, which produces 40% of Russia’s oil and more than 5% globally, has said it will raise production above the 4.1 million barrels a day it produced in 2015.

Worse, while OPEC has been busy fleshing out which members will cut production and by how much, OPEC production just soared to 33.75million barrels in September 2016 – an increase of 170,000 barrels a day.

That's a new output record.

It’s also 1.3 million barrels above last year’s average.  So, in short, OPEC agreed to cut production, and then pumped a record amount.

That tells us even OPEC isn’t serious about curbing crude oil supply.

Iraq increased production by 105,000 barrels a day to 4.4 million.  Nigeria increased production by 95,000 barrels a day.  Libya added 93,000 barrels a day to 363,000 with an increase to 600,000 barrels a day likely by the close of October.

Iran increased production by 10,000 barrels to 3.63 million a day.

Only Saudi Arabia has decreased production by 87,500 barrels a day. 

The supply-demand picture isn’t looking healthy either.

In fact, global oil supply for September just hit 97.2 million barrels a day – 600,000 more than August 2016, and 200,000 more than September 2015.

Meanwhile, China’s oil demand in August fell by 4.3% year-over-year to 10.76 million barrels a day thanks to falling demand for gasoline and fuel oil.

At the same time, the International Energy Agency (IEA) just predicted that global oversupply of crude oil would last until the second half of 2017.  It also said that demand is rising at a slower pace than expected, lowering its oil growth forecast by 100,000 barrels a day to 1.2 million barrels from 1.3 million barrels. 

However, the agency indicated that if OPEC sticks to its new targets, a rebalancing could come quicker. 

While the price of oil has regained some lost ground to around $50 per barrel, the higher price may be short-lived because of the failure to really curb production.   However, that won’t prevent us from seeking deeply undervalued oil companies with impressive investment potential in The Cheap Investor.

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