• OPEC reaches new output deal
  • Organisation finally agrees to increase production by “roughly” 1m BPD
  • Oil rallies to its highest level of the month in reaction

The week’s OPEC meeting in Vienna was highly anticipated and threw up its fair share of twists and turns but when all is said and done the group has managed to reach a revised agreement on their level of output. The outcome represents a victory for Saudi Arabia, with oil minister Khalid al Falih saying as he left the meeting that the new arrangement amounts to roughly a 1m-barrels-a-day increase. 

Earlier this week there had been a fair bit of resistance to this deal, with Iran in particular not willing to lift their output. A failure to come to a new deal would have been a blow to the cartel and therefore the fact that Iran has seemingly backed down is a positive as far as OPEC is concerned. 

Donald Trump has wasted little time in chiming in with his response, taking to twitter to post the following:

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 Source: Twitter

Despite the agreement to increase output the market has reacted positively, with both Oil and Oil.WTI hitting their highest levels of the week. This may seem counter intuitive at first with more supply being negative for price but there are a couple of reasons which could explain the positive reaction. Firstly, the fact that any deal was made is a positive as far as OEPC are concerned.If they’d failed to reach a consensus then it may have been seen as very negative for price as it would weaken their position in the market.

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 Oil.WTI has made a strong move higher on the news with the market retesting a prior trendline from below and breaking above the 67.30 swing level. Source: xStation

Secondly, looking at comments from other attendees, the Nigerian oil minister Ibe Kachikwu said that he was under the impression that the increase would be at least 700k bpd, so maybe the level of production won’t increase by quite as much as people had thought. How positive this decision is for the oil price in the long run remains to be seen, but the initial reaction is clearly taking it as good news and price has moved to its highest level of the month this afternoon.