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As members of the OPEC consortium agreed a production target of 32.5m-33 m barrels a day at a meeting in Algiers on Wednesday “to accelerate the ongoing drawdown of the stock overhang and bring... rebalancing forward,” credit ratings agency Fitch says this signals the potential for greater co-ordination among its members.
However, the target itself is largely symbolic, Fitch Ratings says. “The announcement supports our view that oil prices will continue their recovery, but does not make a strong rebound materially more likely.”
At the meeting, OPEC agreed that a high-level committee will recommend member country production levels and there will be “serious and constructive dialogue” with non-member producers on how to stabilize the oil market.
The target implies a production cut of between 240,000 b/d and 740,000 b/d from August levels. This would be the first agreed cut since 2008, and it indicates a slightly greater propensity to co-operate between OPEC's members to support prices.
”This reduces downside risk to oil prices and reinforces our expectation that the stabilisation and recovery since the beginning of the year will continue,” Fitch Ratings concluded. “This is reflected in our forecasts for average prices for Brent and WTI of $45/b in 2017 and $55/b in 2018.”
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