Monday, May 29, 2017

OPEC has decided to extend its plan to reduce oil production :


Members and non-members of the Organization of Petroleum Exporting Countries have decided to expand their plan to reduce world oil production. As this usually impacts the black gold prices and the correlated forex currencies, we suggest you decrypt this important meeting today.

Back to the meeting
Last November, members and non-OPEC members decided to implement a plan to reduce daily oil production. As of January 2017 and for 6 months, all countries have committed to limit production to 32.5 million barrels per day. At that time, they were already issuing the idea of ​​extending this agreement for another six months depending on market conditions and prospects.
We are now at the end of May and the results of this effort have not allowed a significant rebalancing of the market. The price of crude oil has hardly improved. Not surprisingly, at this new meeting, members and non-OPEC members have therefore extended the reduction agreement for a period of nine months.

How have oil prices reacted?
With the speeches of the various members and non-members of OPEC and the extension of the nine-month reduction in production, it was expected that the markets would welcome the news positively, but this was not the case. Indeed, the main players were disappointed because many of them expected a further reduction or extension of the measure to reduce production by 12 months.
With that, oil prices fell again. They even recorded their biggest slip since early March. Currently crude oil prices are at $ 51.46 per barrel.

And now ?
If the new measure "does the trick" as the majority of people at this OPEC meeting seem to think, the main oil producers could regain their colors by 2018.
The problem, however, is that the current plan will not provide incentives for price stability unless OPEC presents a sort of exit strategy. The organization has nevertheless stated that it will do everything necessary to achieve the rebalancing of the market.
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