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The Math Behind OPEC’s Revised Production Cut Still Does Not Work

The Math Behind OPEC’s Revised Production Cut Still Does Not Work

 

zerohedge.com / by Tyler Durden / May 15, 2017 11:02 AM


“Whatever it takes.”

That’s what Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak said in a statement overnight in Beijing they would do to reduce the global oil inventory overhang, using the immortal phrase coined by ECB’s Mario Draghi five years ago in his successful bid to defend the euro. For OPEC, however, “whatever it takes” may not be enough.

As reported earlier oil surged today, with Brent rising above its 50 and 200 DMA, after Saudi Arabia and Russia announced an agreement that the OPEC production cuts of 1.2MMbbls agreed upon last year in Vienna, should be extended through the end of the first quarter of 2018, effectively assuring that the May 25 OPEC summit later this month will agree on the same. There is, however, a problem: based on the simple math, a simple extension will not be nearly enough to bring the oil market back into balance.

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