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Expect a volatile day as OPEC meets in Vienna to discuss policy

By A/S Global Risk Management.



Michael Poulson, Oil Risk Manager at A/S Global Risk Management. Image credit: A/S Global Risk Management


Updated on 22 Jun 2018 09:02 GMT

During this month Saudi Arabia has shifted its opinion regarding the OPEC+ production cut. Saudi Arabia has been the front runner in the production cuts, but as Venezuela's production is further decreasing and Iran is heading for sanctions, Saudi Arabia now likely seeks to increase production at today's meeting. Together with Russia, Saudi Arabia earlier this week mentioned a potential increase in production of 1.5 mbpd. However, Iran also this week opposed that increase together with Venezuela. Now, Saudi Arabia is allegedly seeking a compromise of 1 mbpd increase.

Saudi Arabia is the largest producer in OPEC and usually has the last say; therefore, an increase in production is expected. Whether it will actually be 1 mbpd is questionable - some suggest that an increase of between 0.5 and 1 mbpd is more realistic. That would be an increase of around 0.5-1.0% of global daily production.

If production is increased by below 1 mbpd, it is questionable how much the price will be affected, especially because the production will not rise by this amount from one day to the other. However, if OPEC+ comes up with a united agreement of increasing by 1.5 mbpd, the price is likely to be affected - at least gradually - as production increases. All in all, expect a lot of wait-and-see and potentially a lot of volatility in the coming hours and days.



A/S Global Risk Management is a provider of customised hedging solutions for the management of price risk on fuel expenses. The company has offices in Denmark and Singapore. For further details about its risk management products and services, please call +45 88 38 00 00 or email hedging@global-riskmanagement.com.






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The day before the official OPEC meeting
A/S Global Risk Management Ltd.

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