OPEC Decision: Same old tale...Different outcome
- OPEC roars back to show she hasn’t lost that old magic. The cartel and its allies stood together and agreed to extend its production agreement (‘Declaration of Cooperation’) until December 2018 and has scheduled June 2018 to assess the market and evaluate its agreement. Saudi Arabia and Russia, the key players, reinforced their alliance to comply to the agreement despite a hesitant rhetoric from Russia. More importantly, Nigeria and Libya, have now been included in the agreement. Both countries are expected to limit production to 2017 high which informed the cap on their collective output at 2.8mbpd (excluding condensate). Assuming Libya produces at its 2017 peak of 1.01mbpd, this implies Nigeria’s production should hover around 1.8mbpd which is ~2.1mbpd (inclusive of condensate).
- In this piece, we update our views on the crude oil market and our forecast on crude oil prices for 2018. Further down, we analyse the impact of our views on the domestic macro with respect to the external reserve and the currency market. We also scrutinize the impact on the fiscal account and, in extension, borrowing plans of the FG.
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