What was expected to be a drawn-out affair, with Iran potentially resisting and even leading to the collapse of the cartel, moments ago OPEC reached a deal in principle to raise oil production by 1 million b/d on paper, and in reality by 600 kb/d as many of the OPEC nations are already tapped out and unable to produce more.
“Real” increase of 600,000 b/d: BBG
— Vandana Hari (@VandanaHari_SG) June 22, 2018
The deal is roughly what the committee had agreed to yesterday and is the plan pushed by Saudi Arabia all week.
As Bloomberg notes, this is the deal traders have been waiting for:
The fear was that, if the meeting broke up in disarray, Saudi Arabia would simply open the taps and other producers would follow suit, unleashing far more supply than the market needed. What this deal does is to bring some order to the process of easing supply restraint.
Indeed, absent some last minute shock, Iran appears to have gone along with the majority and will comply with what is effectively A Saudi-Russian decision, prompted by Trump complaints for the cartel to produce more oil .
As Bloomberg further adds, any distribution of output increases among OPEC and non-OPEC members “is going to create winners and losers.”
While the headline number is what will matter for oil prices, the relative gains and losses against their fellow members will also be important to the participants. That could mean ministers still have a way to go before they are finally done. But the fact that they have got as far as they have means that cohesion has, once again, proved paramount.
Brent crude edged toward $75 a barrel on the headlines, but has pared back a bit, whereas WTI was trading in the upper $66 range, not a big move from the recent range, suggesting that the outcome is largely as priced in.
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