Opec’s long-term aim is to run down excess stocks

Opec’s long-term aim is to run down excess stocks:

"The deal between Opec and some non-member countries to limit production over the next six months caught the market by surprise. Prices received an immediate boost and Brent, the global oil marker, is now trading at an 18-month high above $58 a barrel. Even so, scepticism remains widespread.

But the 13-member group — and its most important member, Saudi Arabia — has every incentive to make this deal work. Those who doubt that the cuts will be fully implemented should consider the broader context.

Opec has agreed to curb output by 1.16m barrels in the first half, while Russia and a handful of other producers have said they will trim output by 560,000 b/d. Even if some countries do not fully comply, the combination of firm commitments from Saudi Arabia and its Gulf allies — they have pledged 800,000 b/d of cuts — and natural declines in such places as Venezuela suggests Opec output will fall."



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