Macro-Advisory In-Context Oil Update October 2016


The World Energy Congress is currently taking place in Istanbul (10‐13 October). President Putin is expected to
attend the opening day session and is expected to give verbal support to the notion of an oil production freeze. This may provide some additional short‐term oil price support. But Russia will not/cannot commit to a reduction in oil
output. Neither will the Iranians and most other OPEC producers. That burden can only fall to the Saudi and, to a lesser extent, the UAE and Kuwait. In reality, the notion of a cut mostly shouldered by Saudi Arabia is a non-starter while a production freeze can, at best, only support the price of Brent at around US$50 per barrel. That is because any higher price will see the return of some of the 500,000 barrels of US shale oil which has been cut since late last year and make it easier for Iran to attract some of the billions of dollars it now needs to boost oil output further.