Oil & Gas Sector Commentary - OPEC Reaches a Decision on Output Freeze

Oil & Gas
Proshare - Facebook Proshare - Twitter Proshare - Linked In Proshare - WhatsApp

Thursday, September 29, 2016 1:04pm / Meristem Research

In the just concluded International Energy Summit on the 27th September 2016, OPEC finally agreed on an output freeze, the first successful attempt since 2008 in which the petroleum committee decided to cut output by c.750,000bpd from its current production of 33.24MMbpd to 32.50MMbpd

Each country is expected to make a decision on the production cut it is willing to absorb and this is to be communicated at the next formal OPEC meeting scheduled to hold in November 2016.

The Committee also agreed to give Nigeria, Iran and Libya an opportunity to produce at maximum levels in order to balance their production levels given the peculiar challenges these countries are facing. Post OPEC decision, an increase in oil price by c.5% to USD48.32pb at the close of market yesterday has been observed.

The outcome of this decision will lead to increase in oil prices which we further expect to bolster proceeds from crude oil production despite the reduced output. We do not believe this decision would result in a long term rally in prices, as this could incentivize the return of discouraged high-cost shale oil producers.

In addition, we anticipate that this decision could potentially drive positive sentiments in the equities market domestically, particularly within the oil and gas sector in the short to medium-term as investors are eager to key in their interest in the sector.

Related News
Oil & Gas Sector Update - Capitalising on Market Dislocations

2.      Where Will Oil Prices Go After Algiers?

3.      Frack Sand: The Unsung Hero Of The OPEC Oil War

4.      Implications of the new petrol price band

5.      Finally, Nigeria Removes Subsidy On Petrol, Deregulates Importation Of Fuel

6.      Why it is inevitable to take action against fuel subsidies

7.      Total Nigeria Plc Downstream At Its Best

8.     TOTAL Declares N8.93 bn PAT in Q2 2016 Result Proposes N3 Interim Dividend SP N206.00k

9.      Mobil Oil Nigeria Plc Records 80% Sales Growth YoY in Q2'16

10.  MOBIL Outlook improves in Q1 16 despite product scarcity 

Related News