Opec’s cut: less than meets the eye

The oil price bounced by 5% on the news that Opec had agreed to cut output for the first time since 2008. But non-Opec producers are ramping up production.

Those who believe that Opec, the oil producers' cartel, can no longer move markets the way it used to had a surprise last week, says The Economist. Prices bounced by 5% on the news that Opec had agreed to cut output for the first time since 2008.

It has been pumping at full throttle in a bid to put US shale producers out of business and defend market share. But this has proved expensive, especially for swing producer Saudi Arabia, which racked up a budget deficit of 15% of GDP last year and has had to borrow money for the first time in years. It has even had to reduce civil servants' privileges and trim ministerial pay. So Opec is now willing to contemplate taking its foot off the accelerator. The idea is to limit production to 32.5 million to 33 million barrels per day (mbpd), between 0.7% and 2.2% below current output. The details are to be hammered out in November.

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Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.