Last week, oil rallied to its highest level in the year at $54 a barrel. This was mainly due to the OPEC’s agreement to cut its output by almost 1.2 million barrels. The oil price rally was also due to the expectation where the market did not expect an agreement to be reached, as well as the more-than-expected production cut.
Though an agreement has been met, there has been much skepticism as to whether the members will hold to the production levels as there are numerous times where its members have violated the group’s decisions for self-interest. This is a classical example of games theory. Just a short summary, if members of a group expect others to cheat on the rules set due to huge self benefits, then it would be more wise to first violate the rules and have a more prominent hand although this course of action …Read the full article →