OPEC's decision to curb production "will go a long way in stimulating stock drawdown", the organization's Secretary General Mohammad Barkindo told CNN in an interview, admitting that the overhang is still huge, and the market has not been rebalancing as fast as the cartel's producers have wanted.
Against most odds and analyst expectations, OPEC members managed to reach a deal on Wednesday to curb production to a target range of between 32.5 million bpd and 33.0 million bpd, with full details to be finalized at the formal OPEC meeting in Vienna on November 30.
Speaking to CNN, Barkindo said that no OPEC or non-OPEC producer has been spared the impact of the oil price crash in the most severe cycle in 30 years or so. The option to go for the 32.5m-33m bpd band, rather than set the lower number as a production limit, was a needed flexibility to "ensure that all 14 member countries can fit into this band," the OPEC official noted.
Barkindo dodged the direct question whether Iran fits into this band, and just said that Iran's President Hassan Rouhani and oil minister Bijan Zanganeh had assured him on previous occasions that "they were committed to building a consensus, to find a solution out of this severe cycle of price crash".
The Iranian officials had also assured Barkindo that "Iran would do everything possible not only to build but to join this consensus", the OPEC official said, adding that "today they proved it".
Saudi Arabia and Iran "focused on the fundamentals and came to this historic decision", Barkindo further noted, commenting on the coexistence of the regional archrivals within OPEC.
Wednesday's deal caught the markets off guard, and oil prices rallied more than 5 percent overnight, but Thursday's reality check shows that an announcement of a target production range, with details about who's pumping and who's cutting how much coming in two months-at the earliest-is way too preliminary to get too excited about.
At the time of writing, WTI Crude traded up 2.55 percent to US$48.25, while Brent Crude was up 2.22 percent at US$49.77.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More