Loading ...OPEC agrees to production cuts
Nobody was expecting the Organization of Petroleum Exporting Countries (OPEC) to agree to cut production, even if only in principle, as it did on Wednesday last week. The group, which controls about 40% of the global oil market, did a strategy u-turn after having refused to cut output over two years of falling oil prices that saw crude sink to its lowest levels in over a decade.
Although the price responded positively to the surprising news, rallying by more than 5% on the day, the subsequent dip signalled that the market remained sceptical on the outcome actually being executed.
Some commentators, such as PwC Africa Oil and Gas Advisory leader Chris Bredenhann, view the deal with a healthy dose of scepticism, because details on what the agreement will actually entail will only be fleshed out during the group’s November meeting.
“Even then, there are still question marks around if those commitments would, in fact, be honoured,” says Bredenhann. “There is a history amongst various OPEC members of agreeing to something and not sticking to the letter of what they agreed. So, whilst an agreement may come into effect, its execution will remain questionable.”
cont. http://www.mineweb.com/articles-by-type/analysis/opec-deal-shows-times-are-changing/