Report from Riyadh: Why I Remain a Skeptic of OPEC Output Cuts

After spending a couple of days meeting with officials in Saudi Arabia, I remain skeptical that OPEC will be able to get an agreement on a production cut as outlined in the Algeria meeting in late September.

Saudi Arabia would like an OPEC deal. But, unlike previous deals when the Saudis did all of the heavy lifting, the Kingdom wants other OPEC members to participate too.  As we have seen over the past few weeks, this is akin herding cats. 

Moreover, OPEC production in October has increased since the Algiers meeting, which would now translate into deeper cuts that Saudi Arabia and its Gulf allies would have to make. Deeper cuts for Saudi Arabia makes the deal less likely.

Iran and Iraq continue to present major impediments to an output deal. And with time running out before the November 30 OPEC meeting in Vienna, we may instead see a “Plan B.”

MORE FROM MCMONIGLE:

• I'm Skeptical of Saudi Threat to Hike Production

• 2 Reasons Why OPEC Oil Freeze ‘Lacks Credibility’

• What Election 2016 Means For Oil Markets: Iran Nuclear Deal, Keystone Pipeline & Clean Power Policy

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EDITOR'S NOTE

This is an excerpt from an institutional research note written by Hedgeye Potomac Senior Energy Policy analyst Joe McMonigle. For more information about our research email, sales@hedgeye.com.