Dec 9, 2019 - Energy & Climate

OPEC prevents the bottom from dropping out

Ben Geman

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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OPEC prevents the bottom from dropping out

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