Earlier today, oil spiked and pushed stocks to new all time highs, after the Nigerian OPEC delegate Ibrahim Waya said that not only is “everyone on board” ahead of the November 30 Vienna cartel summit, but that he expected details of the output accord would be finalized today.
That, however, was put in question later in the morning when OPEC members said that Iran, Iraq and Indonesia were all said to have “reservations” about a proposed 4.5% production cut. Worse, according to the news, it appeared as if Iran would not be part of the exempt from production cuts group at all, contrary to the Algiers agreement, suggesting that Saudi Arabia had changed its mind once again.
And now, moments ago, oil tumbled to intrday lows on the latest batch of headlines according to which the OPEC Vienna “deal” is now suddenly in jeopardy when Bloomberg reported that the OPEC committee is said to defer the issue of Iran and Iraq – the second and third largest producers in OPEC – to the November 30 meeting altogether, confirming what the skeptics knew all along – that not only will a deal not be finalized today, but that a deal may not even happen next week in Vienna, as the rift between what Saudi Arabia is willing to “cut” to reach a deal and what it demands from its key competitors in a jockeying for market share, remains as wide as ever.
Oil promptly dropped to day’s lows on the news.
As a reminder, earlier today we showed a matrix of probabilities laying out what would happen to the price of oil should OPEC fail to reach an agreement: according to BofA, failure to agree on a production cut next week would mean oil tumbles to $40 (or lower according to Goldman) where, as a result of excess OPEC production of 34mmbpd or higher, it would remain for most of 2017 as the equilibrium in the oil market would be once again delayed indefinitely.