Oil breaches $50 as OPEC agrees output cut

Oil cartel OPEC Wednesday cut oil output by 1.2m barrels a day to 32.5m as ministers hammer out a deal that could see oil prices settle around the $50 dollar mark.

This cut is said by analysts to be enough to normalise oil inventories over a six months period and if economic growth continues around the word, there could a substantial rebound in oil prices.

As news of the deal filtered around the world, Brent crude raced above $50 in brisk trading..

The ministers began their meeting in Vienna as oil is traded higher retracing some of yesterday’s losses overnight and there are now expectations that oil price could rise to $55 a barrel by the first quarter of 2017.

According to a note by Goldman Sachs, the improvement in the price of oil is coming despite

net bearish API data (Crude: -717k, Cushing: +2.4m, Gasoline: +3.4m, Distillates: +2.2m).

Analysts say market sentiment now appears to lean towards an expectation of ‘no deal’ at today’s OPEC meeting.

Iran/Saudi differences continue to be the primary point of friction – Iran proposed a 1mnbd output cut for Saudi Arabia (to 9.5 mnbd), and Saudi said it would reject any deal if Iran and Iraq don’t cut production.

Also Russia will apparently not join any meetings today, but is willing to talk once OPEC members agree.

Proceedings at the crucial meeting are about to get underway.

Flow through the desk is mixed but skewed towards upsides with opportunistic buying on the sell-off coupled with some clients liquidating length.