The global equities rally led by the gains in the energy sector after the OPEC members cut a deal in Algiers, despite the market scepticism and repeated statements that the Oil officials in Iran and Saudi Arabia are not able to find a middle ground in the current conditions.
The Oil prices soared by 5% after the members of cartel agreed to cap output at 32,5-33 million barrels a day from the current production of 34.2 million barrels/day, said Iranian Oil Minister Bijan Zanganeh.
“OPEC has made an exclusive decision today. After 2.5 years, all the OPEC countries have reached a consensus to rebalance the market. We agreed to cut production by about 700 thousand barrels per day” – B. Zangane told reporters.
According to the Iranian Oil Minister, OPEC output can be reduced to 32,5-33 million barrels per day. Although the Qatar’s Energy Minister Mohammed Bin Salah Al Sada said that the reduction is not significant, it will help to analyse the market deeper. He also noted that the decision would be finally validated at the official OPEC meeting in November in Vienna.
Production quotas for each member is going to be determined in November. However, some OPEC countries may not be required to cut their output. As Khaldi Al Falih the Minister of Energy in Saudi Arabia said then Iran, Libya and Nigeria would be allowed to produce at the highest reasonable levels.
Data gotten from the last informal meeting, quoted by Bloomberg, Algeria proposed that the OPEC partners should reduce the total volume of oil production by 796K barrels/day compared to the August level of 33.24M barrels/day to 32,4M barrels/daily. The major cut was due to Saudi Arabia – which went from 442K in August to 10.145 million barrels/day. It is clear that the second place is taken by the UAE with an estimate cut of 155K barrels/day and third Iraq – by 135K barrels/day, which was followed by Kuwait – with 87K barrels/day,
The recommended quota for Iran was 3.7 million barrels/day, which means that Iran can increase the production by 52K barrels/day compared to the August output. Nigeria and Libya are exempted from the reduced output, as both countries are suffering from the consequences of a civil war and insurgency.
The Crude price retreated, with WTI -0.47% and Brent -0.71% as the further impact from OPEC deal is likely to happen, even if the production cut seems insignificant. But it is hope for a bigger deal in the future than a quick market rebalance.
Safe heavens extended declines with Gold stalling near the Wednesdays close at $1,323.50 (-0.05%), German and US bonds yields rise, while Japanese Yen saw a decline against the US Dollar, USD/JPY +0.77% at 101.47.
Greenback index rose by 0.17% to 95.47 as of 10:44 GMT, swaying in the band of 95.00-95.50 as they failed to advance on Yellen’s speech yesterday.Publication source