Both WTI and RBOB prices are tumbling this morning after OPEC member agree to limit oil output through the end of 2018. While this is bullishly longer-than-expected (6-9mo was expected), OPEC members now rely on Russia to agree to these terms, and it appears the market is questioning that. Furthermore, despite US shale output at record highs, Saudi officials are shrugging off any impact.
As The Wall Street Journal reports, OPEC members agreed in principle Thursday to keep limiting their output through the end of 2018, according to people familiar with the matter, providing assurance for an oil industry still struggling through a fragile recovery.
The accord signals that the world’s biggest oil-producing countries believe that a global oversupply of oil is still weighing down oil prices, even a year after they struck their first agreement to cut crude production. Oil in storage – a proxy for the global glut – remains well above historical averages, national oil ministers said.
Any agreement OPEC strikes will be contingent on support from a group of producers outside the cartel led by Russia, which pumps more crude than any country in the world. The Russia-led delegations are meeting with OPEC to hash out a final agreement.
This post was published at Zero Hedge on Nov 30, 2017.