Quarterly oil Market Update (Q3 2016): Are Oil Markets better off with OPEC cuts?

OPECs decision to announce, but not to implement, a cut in production immediately sent Brent oil prices up 6 percent at the end of September. Prices were further supported by statements from Russia expressing its readiness to cooperate in order to limit oil output. OPEC plans on meeting in November, when the extent of OPEC cuts and individual country quotas are to be decided. Whilst the deal to cut remains fragile and fraught with numerous obstacles, as a result of the financial difficulty faced by a number of OPEC member economies, most notably Venezuela, Nigeria and Libya, there will be immense pressure to ensure some sort of deal is reached in November. In this context, we see the most likely outcome being an agreement to cut production, but only by a small amount, more akin to a production freeze rather than an outright cut. Such an agreement would underline OPECs intention to limit further rises in production and help stabilize oil prices at current levels (around $50 per barrel).