As previewed earlier this morning, when the flurry of leaks began, today OPEC reached a deal with non-OPEC partners to extend the oil production cuts until end of 2018 (recall these were supposed to be "temporary" when originally unveiled one year ago) at their meeting in Vienna, as part of producers' strategy to reduce global inventory levels. Below is a summary, via Bloomberg, of the key items agreed on:
- Analysts had previously predicted an extension; a survey showed 9 months as the most likely duration, measured from end of March 2018
- Thursday’s Vienna agreement will have an effective start date of Jan. 1 and run through end-December 2018, superseding previous deal
- Total volume of supply cutbacks from participating nations was left unchanged at ~1.8m b/d, ministers say
- In addition, Nigeria and Libya agreed to a collective cap of 2.8m b/d; they had previously been exempt from supply curbs
- Discussions in Vienna progressed as expected, with Joint Ministerial Monitoring Committee proposing on Wednesday an extension of 6 to 9 months, with a preference for 9
- Thursday’s meeting has concluded; deal will be reviewed at June meeting
- Joint Ministerial Monitoring Committee to meet every 3 months, chaired by Saudi Arabia and Russia
A key part of today's agreement was the provision that a "further adjustment" would be considered in June.
In view of the uncertainties associated mainly with supply and, to some extent, demand growth, it is intended that in June 2018, the opportunity of further adjustment actions will be considered based on prevailing market conditions and the progress achieved toward re-balancing of the oil market at the time.
Confirming this was a statement from the Russian energy minister Novak, who said that the agreement can be adjusted in June - suggesting the deal is in reality a 6 month extension - if the situation changes.
The OPEC communique, in its raw form:
As for the energy complex, in line with the Goldman forecast that today's meeting would likely be a sell the news event, both WTI and Brent are trading near session lows.