OPEC marks its first cut in production since 2008 – Deutsche Bank
Research Team at Deutsche Bank, suggests that the move by OPEC to a preliminary agreement to cut production to 32.5m barrels per day is the first reduction since 2008 and according to Deutsche Bank’s commodity strategists OPEC would lower 2017 production by 1.1m barrels per day based on Bank’s assumptions.
Key Quotes
“The early indications suggest that the agreement may follow the outline of an Algerian proposal for a 1.6% reduction from the Jan-Aug averages for all member countries apart from Libya, Iran and Nigeria. Under this proposal, Iran would be permitted to raise production only up to 3.7m barrels per day which is a small increment from its reported August production of 3.64m barrels. The devil is in the detail though and as our colleagues highlight the precise country level production quotas will not be decided until the November 30th OPEC ordinary meeting. As a result countries may not act to reduce output until December. A more complete assessment of the overall impact will likely depend on the eventual shape of the final agreement which we might have to wait until the end of November to get, along with the potential participation of any non-OPEC producing countries.
So there are still the details to iron out and perhaps the greater question is whether or not the market will trust OPEC to follow through with action and actually cut. Waiting until November also brings a kicking the can type element to all this and one would imagine that implementing the individual country quotas could be where the disputes start but to be fair the preliminary agreement is certainly more than most would have expected.”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
