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Where to go from the OPEC meeting

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 25 Jun 2018 08:30 GMT

The highly anticipated OPEC meeting last Friday questioned the magnitude of the production cut as Saudi Arabia - backed by Russia - allegedly sought to increase the OPEC+ output by 1.5 mbpd. Opposition to this proposal was led by Iran and Venezuela, while a compromise of returning to a compliance rate of 100% was also proposed. This would mean a cut of 1.8 mbpd instead of the 2.8 mbpd cut experienced lately. However, the meeting did not conclude in a clear plan or number of how many more barrels OPEC+ were going to introduce to the market from now on. The market reacted bullish to the outcome of the meeting and closed about $2 higher than it opened on Friday.

The main question is now: How much more oil is OPEC+ actually going to produce? Currently, there are a lot of different answers to that question when looking to market analysts and other OPEC members. The suggested range, though, seems to be between 500 and 800 kbpd as the only members of the deal really being capable of increasing output and exports substantially is Saudi Arabia and Russia. The counterweight to these barrels is the expectation of decreasing output from both Venezuela and Iran. Therefore, it is at the moment difficult to tell how these dynamics are going to balance out. As no drastic decisions have been made, a consistent long-term bearish trend is not expected.



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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Expect a volatile day as OPEC meets in Vienna to discuss policy
A/S Global Risk Management Ltd.

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