Four possible scenarios after the OPEC meeting and how this will affect on WTI

OPEC and major oil producers outside the cartel, such as Russia, are on the verge of a crucial meeting, where production cuts are expected to be extended by nine months by the end of 2018. However, these expectations are too superficial, and until every detail of the transaction is identified and agreed, we expect the price of oil to remain under pressure with increased volatility.

In the following lines, we will present four possible negotiation scenarios based on talks with officials from both OPEC and producer countries outside the organization.

1. Extension of the abbreviated yield until the end of 2018 as Saudi Arabia wishes.
Saudi offer the program to continue until the end of 2018. without amendments and right of change during the period, and at the meeting in June 2018. the cartel only to discuss its effects.

This outcome of the meeting would support the price of oil, with our expectation that WTI will keep close to $65 a barrel in 2018. It is also possible to observe a slight decline before the bulls take over again.

2. Extension by 3 months in order to ensure Russian participation in the deal.
This scenario is the lightest possible for OPEC and aims to consolidate good relations between Russia and OPEC, as in the last few weeks the Russians have alarmed that the US, by its exports and production of shale oil, significantly increased its share of the world oil market . Such a decision would lead to a sharp fall in the price of black gold, and the prospects for the raw material will not be good. In this case, we expect a resumption of the downward trend and a drop in the price below $ 50 a barrel (WTI).

3. 12-month deal from January 2018
This decision will enable OPEC members to renegotiate the terms of the current deal, which will allow many parties outside the organization to become party to the agreement. However, there will be another question that will not be answered at the meeting tomorrow. Such a scenario may have mixed effects, and with more candidates in the agreement, we expect strong oil growth and vice versa.

4. Extending the current deal by the end of 2018. but non-binding nature.
This would allow many of the small participants in the deal to leave because they have budget bottlenecks and more production would cover the deficit in the countries concerned. Such a decision would negatively affect oil, and this would force S.Arabia to move on to more redundancies. OPEC's likelihood of taking such a decision is small but will definitely be discussed among members.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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