As expected, OPEC and its non-OPEC partners have extended their production agreement through 2018 and even assigned “soft targets” to include Nigeria and Libya. Saudi Arabia’s Energy Minister, Khalid Al Falih made it clear in his opening remarks that the goal of the year-old deal had not been fully achieved, notably referring to the IEA’s five-year average stock levels, and indicating that the job of reducing inventories was only half done. On a more practical note, the coalition of countries in this deal, and the special treatment of some members, has been a tremendous diplomatic accomplishment, one not easily reconstituted. So, it makes sense to agree to carry on at this juncture. You can always abandon an agreement. It is much harder to recreate one of this breadth. The existing production deal was a rich layer cake, this extension puts icing on the cake.

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