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Equatorial Guinea Is Not Enough

25 May 2017 by lberuti

Part of continental Europe was closed today and it had a bearing on the market activity, and volumes were on the low side. People spent the whole day keeping an eye on headlines regarding the meeting of OPEC and their allies in Vienna. Hardly anything filtered until the middle of the afternoon when the producer group together with Russia and other non-members announced they had agreed to prolong their previous agreement to limit output for another 9 months. While 6 months ago, the cartel surprised investors and delivered cuts that exceeded expectations, the market did not seem entirely convinced today. People were apparently left a bit disappointed and news that Equatorial Guinea was officially becoming the 14th member of OPEC – it will be one of the smallest producers, pumping 270,000 barrels a day – was not the extra something people had been hoping for. Without a steer on what will happen beyond March, there is concern that OPEC could return to the free-for-all production that caused the free fall of oil between mid-2014 and early 2016. While oil had been stable for most of the day, it lost roughly 4% during the last couple of hours of trading. That was a drag on all commodity names, which today formed the worst performing group in the US high yield universe.