Yesterday, after a lot of talk and much speculation the leaders of OPEC emerged from an unofficial meeting at the Algiers energy summit and shocked a lot of people, not least of all your humble correspondent, by announcing a deal. The oil markets reacted as you might expect when conventional wisdom is defied, i.e. sharply. WTI jumped up around 7 percent immediately the news came out. Overnight, though, futures came off the highs and, in volatile markets yesterday, there was little follow through to higher levels. WTI eventually settled less than a dollar higher than yesterday, and is still in a long term downward trend. Traders, it seems, were asking themselves the questions, is this a real deal, and if so what effect will it have?
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Call me a cynic, but when OPEC’s Secretary General, Mohammad Barkindo came out with a big smile and his thumbs up it reminded me too much of Howard Macmillan returning from a meeting with Hitler and declaring “Peace in our time!”…just before the Nazis invaded Poland. Barkindo announced that OPEC had reached a great deal, but then as details emerged some began to question that. They have, in principle, come to an agreement to cut overall production by cartel members from 33.2 million barrels a day in August to 32.5 million after November. That represents a roughly 2 percent cut from all time record levels that have produced a huge global glut of crude.
That doesn’t sound like…