The much anticipated headline is out and, as Bloomberg reports, OPEC has reached a deal agreeing to cut oil production by 1.2 million barrels per day to 32.5mmbpd from the current level of 33.6mmbpd. This would be OPEC's first production cut since 2008.
Shortly after the conclusion of today's Vienna meeting, OPEC released the following table which lays out the breakdown of what the current reference production level is by nation, as well as the proposed adjustment to get to a 1.2 million barrel per day reduction, as well as the "pro forma" production number that will be effective on January 2017.
Following yesterday's press reports that Steve Mnuchin and Wilbur Ross would be selected for two of the top economic posts in Donald Trump's administration, earlier today the two confirmed their nominations to lead the U.S. Treasury and Commerce Department, respectively. Mnuchin and Ross spoke on CNBC's "Squawk Box."
OPEC was said to be "close" to reaching a deal to cut supply by 1.4 mmbpd, assisted by a 600kbpd cut coming from non-OPEC nations. However, as Reuters adds, if such a deal is agreed it would be conditional on non-OPEC involvement as OPEC would need non-OPEC members, such as Russia to agree to the 600kbpd and may require another meeting as early as December.
European, Asian stocks rise as do S&P futures as OPEC ministers gathering in Vienna appeared to be set to announce a deal to cut oil production and prop up global prices. Oil has surged over 7% as a result, also pushing US TSY yields and the dollar higher.
Numerous outlets have reported that former Goldman banker Steven Mnuchin "a financier with deep roots on Wall Street and in Hollywood but no government experience" is expected to be named Donald J. Trump’s Treasury secretary as soon as Wednesday.
With the last day of OPEC pre-negotiations almost over, the latest from Vienna is that Iran and Iraq appear to have softened their positions ahead of a crucial OPEC meeting on Wednesday, however as the WSJ reports, "it may not be enough to satisfy Saudi Arabia’s demands for a broad-based oil-production cut." Here are the latest hurdles to reach a deal.
So let me get this straight a $1 difference in the oil price means an additional 1 Billion extra to Iran and Iraq`s annual oil revenue and they are fighting over a measly 200,000 barrels per day oil production delta.
The irony is that it would work because Saudi Arabia would get the same amount of revenue from half the production as oil prices would double in price in two weeks, and as oil prices keep rising Saudi is again the swing producer in the oil markets.
In what appears to be a material shift in the perceived OPEC balance of power, while Iran (and Iraq) have so far refused to concede to Saudi demands for production cuts, moments ago Reuters reported that in what can only be described as a demonstration of power, Iran proposed that it be Saudi Arabia that foots the entire proposed production cut, by reducing its own production to 9.5 million barrels.