If there is one thing clear in the oil market, it is this: OPEC’s ploy to cut output in an effort to raise prices has failed. The cartel has twice put in place an agreement to lower overall output, but it has failed to prop up the market, as the bloc continues to be undermined by non-OPEC producers pumping ever more oil. Now OPEC has a new problem on its hands—how does it end the agreement without causing even more of a rout than is already in place? Saudi Arabia is already saying the deal will not be renewed when it ends in March 2018, but that it does not want to “shock the markets”.
FINSUM: We don’t think markets will be shocked when this deal is not renewed because the writing has been on the wall for months. It will have the effect of lowering oil prices further, however.