Update:
WTI has whipsawed, as expected but is now materially lower following the morning rally to $58 which came ahead of the leak that the cuts had indeed been extended:
Here are the bullet point details via Bloomberg…
- OPEC reached deal with non-OPEC partners to extend oil production cuts until end of 2018 at meeting in Vienna Thursday
- Analysts had previously predicted an extension; a survey showed 9 months as the most likely duration, measured from end of March 2018
- Thursday’s Vienna agreement will have an effective start date of Jan. 1 and run through end-December 2018, superseding previous deal
- Total volume of supply cutbacks from participating nations was left unchanged at ~1.8m b/d, ministers say
- In addition, Nigeria and Libya agreed to a collective cap of 2.8m b/d; they had previously been exempt from supply curbs
- WTI, Brent futures prices slipped Thursday, aside from the expiring January Brent contract
- Discussions in Vienna progressed as expected, with Joint Ministerial Monitoring Committee proposing on Wednesday an extension of 6 to 9 months, with a preference for 9
- Thursday’s meeting has concluded; deal will be reviewed at June meeting
- Joint Ministerial Monitoring Committee to meet every 3 months, chaired by Saudi Arabia and Russia
Earlier:
“Buy the rumor (again) and then (immediately) sell the fact?”
It’s looking that way thus far. Earlier this morning, WTI rose to near $58 on reports that OPEC was set to extend the production cuts by 9 months. That, according to a delegate.
“The nine-month extension was expected but doubted earlier in the week when Russia did a bit of grandstanding,” Saxo’s Ole Hansen, said a few hours ago, adding that “it’s mostly relief that nothing prevented the extension. Now they are probably going to be talking about $60- $65/bbl as being acceptable.”
Well, a couple of minutes ago, we got this headline out of Vienna:
- OPEC AGREES TO EXTEND OIL SUPPLY CUTS TO END OF 2018: DELEGATE
Delegates said the discussions have now “moved on to the mechanism that will be used to review the agreement in the middle of the year.”
Ok, got it. So ostensibly, that should be bullish. But here’s the reaction:
Expect all kinds of shenanigans and algo madness with this for the rest of the day, but suffice to say that more than a few people (including Goldman) suggested that this was already baked into the cake.
As a reminder:
Same kind of reverse expectation earlier this year when Russia said they wouldn’t agree to cuts. As always, best to just ride the wave until the announcement and get out while ahead.