Alejandro Núñez holds a bachelor’s degree in Business Management & Administration by the Complutense University of Madrid, and a bachelor’s degree in Actuarial Science. He also has a Master’s degree in Corporate Finance & Investment Banking by the I.E.B., as well as a specialization in technical and quantitative analysis by the I.E.B. He is an expert in sectorial analysis and an analyst at XTB Spain.
The OPEC meeting at Vienna is discussing the preliminary agreement reached last September, in which the 14 participating countries agreed to reduce oil supply by 4-4.5 percent (1.2 mbd). Key negotiations are based on the following four countries:
- Saudi Arabia adjusts its output according to the supply cycle, so an oil reduction deal will not heavily affect it in the long term.
- Iraq argues it cannot reduce its output given its need for funds to finance the military campaign against ISIS.
- Iran, sanctioned for a long time, intends to recover the pre-sanction output level, so it will be one of the largest obstacles for an agreement.
- Russia, which statements suggest it is willing to freeze output at least, without any reduction.
Oil market situation in the long term: a sharp optimistic bounce has taken place, where oil futures are above spot prices, causing a chain reaction in the market.
Four possible scenarios after the meeting:
1– Disagreement at the meeting, as a result of the market correction experienced, with prices standing at $41-$43.
2- Another possibility is an agreement on a small reduction in daily output (0.5 mbd), with Russian freezing, along with OPEC members, current output levels. If so, oil price could rise in search of the $54 floor.
3- An output freezing by Russia and an output cut of 1 mbd by OPEC members, creating an upward trend in oil prices around $60 per barrel.
4- The fourth option, just like the previous one, but with a larger cut above 1.5 mbd.
After the last market rumors, we have seen how oil price climbs around 7 percent during the whole morning of the meeting, and if the agreement is finally sealed, we will see it around $60 by the end of the year.