Oil ministers from the Organization of Petroleum Exporting Countries (OPEC) convene in Vienna for their semi-annual meeting on Thursday, November 30th. Here’s the key things you need to know.

Cuts – how much, how long?

The main topic for discussion will be whether to extend the 1.8m barrel-a-day production curbs due to expire in March 2018.

Under the deal, OPEC and 11 other non-OPEC producers agreed to cut output by 1.8 million barrels per day for the first six months of 2017. At the last OPEC meeting in May, it was agreed this should be extended by another nine months until March 2018.

Markets have already priced in some extension to the cuts, with crude futures soaring above $64 a barrel in expectation that OPEC and the rest will carry on with the scheme. Market consensus suggests a further 6-9 month extension, but no deepening of the overall amount being taken out of the market each month.

With the markets expecting a deal, the margin for error is low. In May, crude sank after the cartel failed to deliver more than was already expected. The potential for bearish surprise is therefore quite high.

Prices may fall in the aftermath if speculative longs sell the fact. Speculative net longs have reached record highs coming in to the meeting.


As the largest exporter outside of OPEC, Russia is key to the deal. Officials say the country is ready to support extending the deal, but are yet to indicate how long or how deep they should go.

Of particular importance are the relations between Russia and OPEC ringleader Saudi Arabia. Last time they presented a unified front but higher crude prices are not as useful to Russia as they are to Saudi Arabia.

Russian producers are concerned about losing market share as higher prices bring more exporters on stream. Meanwhile, weaker crude prices make for a weaker rouble, which has been a positive for the broader Russian economy. The consensus is that Russian will bail before OPEC members would like and this could play out in a shorter-duration extension that the market expects.

Exemptions and compliance

Libya and Nigeria have so far been exempt from OPEC’s curbs and seem set to remain outside of the agreement. A bullish surprise for crude prices would involve the pair being asked to cut output.

Rising production from these two and others has been absorbed by falling exports from Iraq, the number 2 OPEC producer after Saudi Arabia. At the same time, Saudi has been pumping less than its OPEC quota allows and production in Venezuela has declined sharply amid the country’s economic chaos.

As such, compliance remains high with the International Energy Administration (IEA) suggesting it is running at 92%. And the cuts have been successful – the global oil supply glut has declined by 183m barrels to 154m, according to OPEC data.

US shale

If OPEC and Russia are on one side of the oil price equation, on the other side sits the US. Shale producers in the US were whacked by the collapse in crude prices but the rally has seen them return to the market. Simply put the more OPEC forces up prices, the better for shale producers.

As a result of higher prices, and a lower breaker-even for shale producers, output has soared for the last 11 months and is expected to climb again in December, rising a further 80,000 barrels a day to 6.17 bpd, according to the US Energy Information Administration

OPEC knows the dilemma. It has been forced to dramatically increase its forecast for shale oil production over the next four years.

North American shale output is now expected to reach 7.5 million bpd by 2021, 56% higher than the forecast a year ago.

Crude prices

The rally from June’s $44 handle seems to be in a phase of consolidation. Following the late-October, early-November rally from the $58 handle, Brent futures have been stuck in a range between $61 and $64 since. In the last week, in anticipation of the OPEC meeting, this has tightened to a range between $62 and $63.


If the market thinks OPEC has failed to deliver enough, there is support at $61 (the mid-Nov lows) and then below that at $60, the triple lows of Oct 30th – Nov 2nd.


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