Dec 9, 2019 - Energy & Environment

OPEC prevents the bottom from dropping out

OPEC building
Photo: Omar Marques/SOPA Images/LightRocket via Getty Images

The upshot of the revised OPEC+ deal seems to be that they've kept a floor under prices for now and even pushed them up, but they've hardly juiced the market.

Catch up fast: OPEC and allied producers including Russia on Friday deepened their production-limiting deal by 500,000 barrels per day as they seek to prevent a glut. But there was a twist: Saudi Arabia pledged to continue with a voluntary output cut of another 400,000 daily barrels.

  • That means an overall cut of 2.1 million barrels per day through March, when they'll revisit things.

Where it stands: Brent crude is trading down at roughly $63.79 this morning, slipping after a $1-per-barrel rise Friday that capped several days of gains as officials met to discuss production cuts.

What they're saying: Barclays analysts, in a note, called the cut "surprisingly deep."

  • But they caution: "[A] lack of clarity on the path for the group's output beyond 31 March 2020 and the exclusion of condensates from Russia's target calculations partly tempered the bullish sentiment."
  • Rapidan Energy Group, which had been predicting such a cut, expressed doubt about its efficacy.

But, but, but: They doubt it will be enough to "avert steep inventory builds (well above seasonal swings) and a corresponding crude price selloff in the coming weeks-to-months."

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