OPEC surprised the markets by agreeing to reduce the oil production to 32.5-33 million barrel per day. OPEC estimates its current oil output at 33.24 million bpd in August producing uh higher than the targeted level of crude oil production at 32.5 mbpd. They agreed to reduce the oil output by 750,000 bpd.
The detailed report of each country maintaining their production isn’t decided yet. All these numbers are to be detailed in the formal OPEC on 30th November meeting. Several OPEC and NON-OPEC countries are to be involved in this strategy.
Iran, Libya and Nigeria are exempted from reducing oil output. They have been facing with lot of production curtailments due to geopolitical tensions terror attacks and sanctions. Iran is currently producing 3.6 mbpd which is very lose to 4 bpd. A level at which Iran ay agree to freeze its oil production. Libya oil output stands at 450,000 bpd which is much lower than the 1.5 mbpd yearly. The nation’s oil output has been hit due to military attacks on its export facilities. Nigeria oil production has also been hit due to attacks on energy facilities.
The cutback in production is not huge but how the countries divides this among themselves that matters. Saudi Arabia is currently producing 10.7 million barrels per day. It increased the production due to domestic demand during the summer season. Saudi would decrease the output again as the summer season demand wanes. The bullish statements would Saudi cutting the production by large volume, Iran also agreeing to freeze its oil output and last but the most important Russia supporting the move.
We expect that the OPEC curbing oil production will prove to be positive for oil prices. Pries may rally towards $55-60 per barrel before the meeting on expectations of oil output cut, first time since 2008.