OPEC agreed to cut production for the first time in eight years, according to a delegate briefed on the matter that Bloomberg spoke with under conditions of anonymity.
Sources that asked to remain unnamed due to the sensitivity of the issue said the group agreed to drop production to a range of 32.5-33.0 MMBOPD. The group reported producing 33.2 MMBOPD in its August report, meaning that OPEC would cut, at most, about 0.7 MMBOPD under the new agreement.
While some members of the group will have to cut production, Iran will not have to freeze its output, Iran’s Oil Minister Bijan Namdar Zanganeh said following a meeting in Algiers. OPEC will not decide targets for each country until its next meeting at the end of November.
“The cut is clearly bullish,” said Mike Wittner, head of oil-market research at Societe Generale SA in New York. “What’s much more important is that the Saudis appear to be returning to a period of market management.”
Read: http://www.oilandgas360.com/opec-agrees ... S_Campaign
OPEC Agreement - Just the start
OPEC Agreement - Just the start
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: OPEC Agreement - Just the start
Adam Longson, CFA, CPA – Morgan Stanley
September 28, 2016 11:37 PM GMT
OPEC agreed in principle to cut production, which would pull forward rebalancing. Focus now turns to execution where the history is poor. While positive short-term, the details are less bullish than the headline agreement. Intervention is also a medium term negative that reduces cyclical upside.
An agreement to cut OPEC production likely ends 2 years of unrestrained output, a clear short-term positive. The cartel has agreed in principle to reduce output to 32.5-33.0 mmb/d from 33.2 mmb/d in Sep. But as expected, details and country level quotas still need to be finalized at the official OPEC meeting in Vienna on Nov 30 via another committee. Notably, the “agreement” leaves unrestrained output from Iran, who plans to grow, as well as Libya and Nigeria, who are suffering through outages. A cut in supply to 32.5 mmb/d doesn’t solve the oversupply immediately, but it could potentially pull forward the global oil market rebalancing to as soon as early 2017. At 33 mmb/d, market rebalancing is likely in 2H17, but a non-OPEC supply response could put that timing at risk. Focus now turns to execution, with plenty of risk. This is not the only OPEC agreement to limit production in this downturn, and thus skepticism on finalization is warranted. For example, a production freeze agreement early in 2016 failed to materialize at the April Doha meeting when more specific commitments were required. Similarly, without country level allocations, this latest agreement could come apart as the details are negotiated, although it appears to have more support. Even with an agreement at the Nov 30 meeting, actual reductions in OPEC production probably won’t be fully in place until sometime in 2017. In the interim, OPEC will look to non-OPEC for additional support, with Russia signaling a willingness to freeze production at record levels, but not cut. Headlines may be better than reality. Some of the proposed declines in OPEC supply would happen naturally.
September 28, 2016 11:37 PM GMT
OPEC agreed in principle to cut production, which would pull forward rebalancing. Focus now turns to execution where the history is poor. While positive short-term, the details are less bullish than the headline agreement. Intervention is also a medium term negative that reduces cyclical upside.
An agreement to cut OPEC production likely ends 2 years of unrestrained output, a clear short-term positive. The cartel has agreed in principle to reduce output to 32.5-33.0 mmb/d from 33.2 mmb/d in Sep. But as expected, details and country level quotas still need to be finalized at the official OPEC meeting in Vienna on Nov 30 via another committee. Notably, the “agreement” leaves unrestrained output from Iran, who plans to grow, as well as Libya and Nigeria, who are suffering through outages. A cut in supply to 32.5 mmb/d doesn’t solve the oversupply immediately, but it could potentially pull forward the global oil market rebalancing to as soon as early 2017. At 33 mmb/d, market rebalancing is likely in 2H17, but a non-OPEC supply response could put that timing at risk. Focus now turns to execution, with plenty of risk. This is not the only OPEC agreement to limit production in this downturn, and thus skepticism on finalization is warranted. For example, a production freeze agreement early in 2016 failed to materialize at the April Doha meeting when more specific commitments were required. Similarly, without country level allocations, this latest agreement could come apart as the details are negotiated, although it appears to have more support. Even with an agreement at the Nov 30 meeting, actual reductions in OPEC production probably won’t be fully in place until sometime in 2017. In the interim, OPEC will look to non-OPEC for additional support, with Russia signaling a willingness to freeze production at record levels, but not cut. Headlines may be better than reality. Some of the proposed declines in OPEC supply would happen naturally.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: OPEC Agreement - Just the start
Phil Flynn's take: http://www.investing.com/analysis/the-e ... -200156232
I agree with Phil that the amount of the production cut is not as important as the fact that Saudi Arabia agreed to make most of the cuts. The Kingdom knows they must something or else their wealth will continue to drop like a rock. They simply cannot afford to let this go on much longer.
I agree with Phil that the amount of the production cut is not as important as the fact that Saudi Arabia agreed to make most of the cuts. The Kingdom knows they must something or else their wealth will continue to drop like a rock. They simply cannot afford to let this go on much longer.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: OPEC Agreement - Just the start
EnerCom's take: http://www.oilandgas360.com/prices-head ... S_Campaign
My Take: Speculators set the near-term oil prices and the traders will not be willing to take large short positions with OPEC willing to cut production.
My Take: Speculators set the near-term oil prices and the traders will not be willing to take large short positions with OPEC willing to cut production.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: OPEC Agreement - Just the start
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group