Reference no: EM131004654

What do the following 2 article summaries have to do with finance?

In the first article it discusses how crude-oil prices increased and how that would hopefully get Russia and the Organization of the Petroleum Exporting Countries (OPEC) to go along with production cuts. A meeting in February is being arranged to discuss ways to strengthen weak oil prices and to go over the production cuts. Crude oil for March has been seen to have a price of $33.22 a barrel on the New York Mercantile Exchange (Nicole Friedman, 2016). Due to the fact that the U.S., in 2014, had sent the global crude market into an oversupply, other producers increased their production. Two major suppliers, Saudi Arabia and Russia, increased their output which allowed prices to lower. OPEC decided not to participate. Saudi Arabia believes that is they cut their production it would allow higher-cost producers in the U.S. and other locations to drill more wells (Nicole Friedman, 2016). Cuts can only happen if large producers, such as Russia, Iraq and Iran take part. According to a Gulf OPEC official, Saudi Arabia wants to take part in balancing the market and wants to cooperate with others to make sure the market remains stable. Russia on the other hand refuses to cut production. Lastly, if production cuts do happen then oil prices could increase to $50 a barrel.

The second article discusses crude oil cuts. Due to the fact that oil prices continue to decline may oil companies have to start making tough choices by cutting costs. U.S. and Canadian producers are losing millions a day at the current prices and some companies have to shut down some of their locations. The U.S. benchmark oil price when as low at $26.21 on Thursday and Brent crude, a global oil benchmark, fell as low as $30.06 (Olson, 2016). There are currently millions of barrels in storage. In order for companies to stay away from bankruptcy they need to make cost cuts. These issues with crude oil have caused many people to lose their jobs which have also caused Texas’ oil production to rise. The reason for this is because they need to keep producing to create revenue. Another reason is because hedging contracts allow companies to sell much of their oil at prices that are higher than where crude currently trades (Olson, 2016). The companies can then sell the contract when the oil market bottoms out and then use those funds towards company operations.