OPEC reaches agreement for production cut; consumers and drillers in US win
My prediction: if the announced target price of $55 to $60 is reached there will be lots of drilling rigs moved out of US parking lots and into the field.
Report after the announcement of a deal:
11/30 Wall Street Journal – OPEC Reaches Deal to Cut Oil Production – After weeks of negotiation, OPEC reached a deal to cut production 1.2M bopd, to 32.5M.
Prices of Brent and West Texas Intermediate oil went up.
Announced target price is $55 to $60 a barrel.
Here are the production cuts, per the article:
- 486K bopd – Saudi Arabia
- 210K bopd – Iraq
- 696K bopd, subtotal of above
- 504k bopd, unidentified cuts
- Iran will freeze production at a slight amount higher than current.
11/30 – Bloomberg – updated OPEC Agrees to Cut Production in Drive to End Record Glut – Updated report lists reported cuts:
- 486K – Saudi Arabia
- 210K – Iraq
- 139K – UAE
- 131K – Kuwait
- 0 – Indonesia
- 966K – total of above
- 234K – unidentified cuts to hit 1.2M announced total
- 300K, up to that amount, depending on technical details – Russia
Report from early in the morning:
11/30 – Bloomberg – OPEC Agrees to Cut Production in Drive to End Global Glut – First report from an unnamed source indicates OPEC reached an agreement to cut production by 1.2M bopd to 32.5M bopd. The biggest producers, Saudi Arabia, Iraq, and Iran agreed to share the cut with Iran raising production. Yes, the shared burden includes increases for Iran.
The initial report says the 1.2M reduction either will include or have an additional 0.6M bopd reduction from non-OPEC countries.
Will be fun to see the details. More fun to see if it holds.
11/29 – Bloomberg – Brent Crude Oil Climbs Above $50 as OPEC Said Very Close to Deal – Report a day earlier shows Brent crossing the $50 point. Rumors at the time were a 1.4M bopd cut with 0.6M from non-OPEC producers. An anonymous source says Russia is thinking they are willing to participate with some cuts of their own if the OPEC countries reach a deal.
Keep in mind there is a vague consensus that $50 is the point at which a lot of shale producers would be able to profitable resume drilling.
11/30 – Wall Street Journal – OPEC Inches Closer to Output-Cut Deal – Article is based on older information than the above articles. Obstacle is Iran’s objection to how output is calculated.
Rumors cited in article are for a 1.1M bopd cut, from 33.6M to 32.5M.