Somebody apparently blinked in Vienna.
After a truly absurd Thursday that found Al-Falih doing his best to prove to the U.S. that the Saudis were in no rush to turn off the taps, OPEC and Russia managed to avert disaster for an already downtrodden crude market on Friday.
The bottom line: A 1.2m b/d cut will be divided 800k/400k between OPEC and non-OPEC.
That, frankly, is good news for oil bulls – at least in the near-term where that could mean anything from “for the next few hours” to “for the next few weeks”.
To be clear, that 1.2m figure isn’t a “shock and awe” number and indeed, Al-Falih made it clear on Thursday that he wasn’t prepared to countenance an agreement that would “shock” the market.
If you ask analysts, 1.3m b/d is what’s needed to balance things out, but thanks to yesterday’s haggling which centered around a whisper number of 1m b/d, 1.2m looks like a bullish figure.
Who knows, maybe that was deliberate. That is, perhaps Thursday’s drama and consistent chatter around 1m b/d was an effort to set the bar low only to hurdle clean over it on Friday.
Whatever the case, crude is loving it, surging 4% on the way to erasing Thursday’s losses.
Iran is exempt from the cuts, according to delegates. Zanganeh confirmed as much. It looks like Libya and Venezuela are also exempt.
Again, this is good news for oil bulls. It means the Saudis and the Russians were able to come to terms, which is obviously a positive development considering it’s pretty hard for a duopoly to function if the duopolists are at odds.
Additionally, this is likely to satisfy Iran, which is of course laboring under the weight of U.S. sanctions and has variously voiced its displeasure at the extent to which the cartel is now beholden to the very same guy who put the sanctions on. Indeed, Zanganeh said Friday that Tehran is pleased with the deal.
Also pleased are European oil and gas stocks, which spiked higher on the news.
If you’re sitting on some XLE calls, you’re probably in for a decent day as well.
Of course none of the above is going to sit well with renowned commodities “strategist” Donald Trump, although you’d be naive to think somebody in Riyadh didn’t alert him to what was likely to come out of the meeting on Friday.
It will be interesting (to say the least) to see what he comes up with on Twitter. You can bet that he’ll be weighing in, although just to reiterate, it is inconceivable that he didn’t get a heads up before this number hit the tape.