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James Smith, Developed Markets Economist at ING, suggests that while falling Iranian exports have been a bullish factor for the market, this has been exacerbated by  the perception that OPEC+ have not done enough to compensate for Iranian losses.

Key Quotes

“Expectations heading into the recent OPEC meeting in Algiers were high, with President Trump calling on OPEC- through a tweet- to lower prices, whilst there were also media reports that the group would look to increase output by an additional 500Mbbls/d. OPEC ignored Trump and decided against any production increases.”

“This has called into question the capability of OPEC to make up for supply shortfalls, not just from Iran, but also for the continual declines that we are seeing from Venezuela.”

“OPEC production is estimated to have averaged 32.57MMbbls/d in August, up from 32.13MMbbls/d in May and 32.28MMbbls/d in June.”

“Back at the OPEC+ meeting in June, the group decided to increase production by 1MMbbls/d, which would bring compliance for the group back to 100%. However, so far they have failed to achieve this, with the Joint Ministerial Monitoring Committee actually reporting that over compliance in August increased from 109% to 129%.”

“While part of this might come down to whether OPEC has the ability to respond quickly to falling output of certain members, there may also be a reluctance to do so, particularly following the pressure seen on the market over the summer, when certain OPEC+ members started to respond with higher output.”