Oil: Saudi Arabia playing hard ball ahead of OPEC meeting – MUFG

Lee Hardman, Currency Analyst at MUFG, suggests that the main event for oil related currencies this week is tomorrow’s OPEC meeting.

Key Quotes

“According to reports, Saudi Arabia is attempting to pressure Iran and Iraq into accepting a larger share of output cuts. Saudi Arabia has reportedly offered to cut 4.5% from its production levels of about 10.5 million barrels/day in October. But in return Iran must freeze production at about 3.8 million barrels/day; while all members must accept the use of third party production figures published by OPEC On top of that there must also be participation from producers outside the group.”

“Saudi Arabia’s energy minister attempted to provide an upbeat outlook for the oil market stating that it will reach balance in 2017 even if there is no intervention by OPEC sending a message to other members that it is prepared to walk away from a deal. We are less sanguine and believe that a failure to reach an agreement to cut production will result in the price of oil and related currencies weakening materially heading into next year. The risk of lower prices for longer should increase pressure on OPEC members to ultimately reach an agreement to cut production.”