Oil Deal 2
A few weeks ago, OPEC and its allies, also known as OPEC+ voted on an output policy for the remainder of the year, if the policy were passed there would have been 400,000 additional barrels per day to the market each month from August through December, resulting in an additional 2 million barrels per day by the end of the year. However, the United Arab Emirates (one of the countries in OPEC) rejected the proposal and had talks be suspended indefinitely. This week, however, the talks are back in progress and the deal seems to have been finalized. OPEC+ has reached an agreement to phase out 5.8 million barrels per day of oil production cuts by September 2022 and increase production by 400,000 barrels per day on a monthly basis from August.
Many oil and commodity investors have found some air to breathe given this news because before the deal had been reached. Helima Croft, head of global commodity strategy at RBC Capital Market explained “This agreement should give market participants comfort that the group is not headed for a messy breakup and will not be opening up the production floodgates anytime soon”. Back in 2020, the pandemic caused OPEC to cut oil production because the world was largely shutdown, this is yet another nod in the direction of eventual and gradual reopening of economies across the globe. What do you think about OPEC+’s decision phase out production cuts? And do you think this will be enough to lower gas prices?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.