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OPEC in Focus – BBH

FXStreet (Barcelona) - The Research Team at Brown Brothers Harriman notes that markets are heavily focused on tomorrow’s scheduled OPEC meeting, with the odds of a output cut from OPEC slashed.

Key Quotes

“The capital markets are mostly quiet, amid a light news stream, and ahead of three key events in the coming days. US markets are closed tomorrow and light participation is expected on Friday. These events are tomorrow's OPEC meeting, the flash euro area inflation reading on Friday, and month-end portfolio and hedge adjustments.“

“The odds of a substantial output cut from OPEC have slipped. The Saudi oil minister continues to play down the need for output cuts, apparently on the grounds that to stabilize the market, more OPEC cuts are necessary.“

“Although there were some suggestions that Russia could cut output to help facilitate an OPEC cut, they were not seen as particularly credible. A Rosneft official was quoted on the newswires indicating Russia does not plan on reducing its output.”

“Simply put, as a cartel, OPEC ostensibly is interested in keeping prices higher than they would otherwise be. However, for numerous reasons, OPEC is not the price setter it once was. Especially with the rise of US output, there has been a significant shift in the underlying fundamentals, and this requires a new strategy.”

“Essentially, prices may have to fall to levels that begin curtailing production in a significant way. This is seen as closer to $70 for Brent and $60-65 for WTI. “

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