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OPEC’s moves to determine the fate of oil markets in 2018

OPEC’s moves to determine the fate of oil markets in 2018

LONDON: After a volatile 2017, oil markets turn towards 2018 and the topics that will dominate the next 12 months. Below Stratas Advisors sorted the risks into four main topics that its analysts predict will dominate the 2018 news cycle.

OPEC’s success at managing markets has exceeded expectations since signing the crude oil production agreement in November 2016, which has been a significant driver of the 2017 price recovery. At its recent meeting last November, OPEC and its non-OPEC allies said that they decided to rollover the current production agreement through the end of 2018. Before the group had even finished its end-of-meeting press session they were being asked what the plan for unwinding the agreement was going to look like and when it would be announced.

Stratas Advisors expects chatter surrounding what the end of the deal will look like to continue, spiking around every meeting of the Joint Compliance Committee since OPEC left the door open for the deal to be re-evaluated and ended early if needed. Additionally, there appears to be some divide amongst members on the appropriate time to begin discussing an end to the deal. Stratas Advisors anticipates that private discussions amongst members are already ongoing, but said the risk is that the moment these discussions become public there is a chance that markets will effectively believe that the deal has ended.

In Stratas’ Reference Case it said the deal should remain officially in effect through the end of the 2018, but with compliance decreasing notably in June as formal discussions on ending the deal become public.