Derek Brower, LONDON: With the eurozone in crisis, the dollar rising, doubts emerging about China’s economy and the prospect of sanctions against Iran hanging over the oil market, Opec picked a good time to patch up its differences.
In Vienna, on 14 December, the group said it had agreed a 30 million barrel a day (b/d) ceiling on crude production, including output from Iraq. The deal had been sewn up days before, but that didn’t stop a swift slide in oil prices following the announcement. In London, the front-month Brent contract fell by almost 4%, to beneath $106 a barrel: not the reaction Opec expected. The market should calm down.
The 30 million b/d figure is neutral. Opec is already producing at that level – including Iraq, 30.367 million b/d in November, according to the cartel’s Monthly Oil Market Report – and the agreement does nothing more...