Defying all odds, OPEC provisionally reached the much-hyped agreement to cut output in a bid to boost oil prices. According to an OPEC delegate quoted by
But there’s a catch. According to a ZeroHedge
And then there’s the fact that no details have been released as of yet. So the question is, how is this provisional agreement to cut production 1.2 million barrels any different than the provisional agreement to agree—from what was already decided two months ago in Algiers? We’re not sure we can answer that.
But never mind the details. Oil prices started rallying early on Wednesday morning as the OPEC meeting in Vienna started. Even though the meeting still ongoing as of the time of writing, and no official statement has yet been issued, crude oil prices continue to surge, and as of 8:45 AM (EST) WTI Crude was trading up 7.1 percent at US$48.44, while Brent Crude was soaring 7.44 percent past US$50, to US$50.84.
Although the optimism is cautious due to the lack of details, OPEC sources, unofficially, have reported that Saudi Arabia has agreed to treat Iran as a special case, allowing it to increase output to around 3.9 million bpd, according to Bloomberg. This caving on behalf of Saudi Arabia is quite telling of the dire economic straits Saudi Arabia is now in.
The Saudis, Iran and Iraq may have overcome this one issue, but we’ve yet to see who will be cutting/freezing how much, how the deal would be monitored, and will members would stick to it at all—and of course—whether it will actually go through if non-OPEC members fail to climb onboard. A situation eerily reminiscent of the meeting in Algiers.
On Tuesday, just a day before the OPEC oil ministers’ meeting, Iraqi Prime Minister Haider al-Abadi
The Iraqi prime minister said that he had learned that OPEC would decide to cut its total crude output by between 900,000 bpd and 1.2 million bpd. If a cut were to materialize, it would be a reduction of between 2.7 percent and 3.6 percent from the October levels of
“Yes, we will take our share and we agreed to this,” the AP quoted al-Abadi as saying.
According to Kenneth Medlock, director at a center for energy studies at Rice University, a commitment to cut by Iraq could send a signal to other OPEC members reluctant to cut to rethink their views.
Last week, it was the Iraqi prime minister who first
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com: