Brent spiking ~US$1 on the open as the news sinks in. There are only 3 outcomes now, all of them bullish for Brent to head back to US$80:
1) OPEC accept recommendation to aim to resupply market with additional 1m bpd on paper to reduce over-compliance from 2.8m bpd cut back to original output deal of 1.8m bpd cut. The reality is only 600k bpd can be physically added back regardless of this aim.
2) Iran negotiates reduced figure eg they just acknowledge it’s 600k, most likely in my view, Iran are aiming for 300k bpd as negotiating position, less likely.
3) Iran has temper tantrum and OPEC meeting collapses with no consensus agreement, so original output cut stands at 1.8m bpd to end of year. Everyone else will proceed with the additional barrels anyhow, outcome amounts to same as 1) but with more acrimony and leaving all sorts of questions about what happens at Dec meeting when Iran will be under sanctions. Could be ripples elsewhere other than oil markets.
SXY Price at posting:
43.5¢ Sentiment: Buy Disclosure: Held
