The meeting between OPEC members reached the end result after two days of persistent talks. The agreement is to reduce oil production, which even exceeds expectations.
Cartel and their partners agreed to reduce output by 1.2 million barrels per day, with OPEC alone reducing to 800,000 barrels. Iran went out of negotiations, keeping its current quotas because they are subject to US sanctions and are on the list of exceptions.
WTI’s crude oil rose 5.8 percent in the European session, but raised the risk that it may not appeal to US President Donald Trump, who insisted the group keep prices down.
Manufacturers will use baseline production levels in October to combine the future yield cuts to be revised in April 2019. Russia proposed yields to be reduced by 2% in October, but this proposal still subject to future discussion. Such a reduction in yield will amount to 228,000 barrels per day, which is higher than the initial forecast of 150,000 barrels per day.
The largest producer, Saudi Arabia, is under economic strain after the fall in oil prices in the past month. With today’s decision, they managed to reduce this strain, but they also face Trump.
Source: Bloomberg Finance L.P.
Graphs: Used with permission of Bloomberg Finance L.P.
Trader Martin Nikolov