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Opec struck a more unified than normal stance during the extraordinary meeting in Algiers on 28 September, emerging from lengthy talks with a production target, albeit a flaky one. Oil markets reacted strongly, with Brent edging back towards, though not breaking, $50/B.
But serious questions remain over how this will be achieved, as well as more fundamental ones as to whether a short-term price boost is even in Opec countries’ best interests. US production already looks to have bottomed out and will capitalize on any price gains to rally further and replace any Opec reductions potentially dampening prices once again.
Calls within Opec for production to be cut in order to shore up prices are understandable. The group’s combined oil revenues are this year on track to come in at just $430bn, a whopping $750bn or 64% below their 2012 peak (see chart). But it does appear that the worst is now behind it, with the futures curve indicating a less painful 2017, with earnings rising back above the $500bn mark to within touching distance of last year’s figure (see table).
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