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OPEC Looks Totally Bewildered by the Oil Market

• https://www.bloomberg.com, Julian Lee

While it still manages to collect new members here and there, its core group looks more fragile than at any point in nearly 30 years.The historic output agreements, put together so painstakingly last year, are failing. Nearly 12 months of shuttle diplomacy culminated in two deals that would see 22 countries cut production by nearly 1.8 million barrels a day. Implementation has been better than for any previous output cut, with compliance put at 106 percent in May. A resounding success? Hardly.We're now in the final month of those deals and oil prices are lower than when they were agreed. Not only have producers sacrificed volume, but they earn less for each barrel they do produce.

The recent extension of the deals just leaves output restraint in place for another nine months, the best response OPEC could muster. Deeper cuts were barely mentioned. Assertions to do "whatever it takes" ring hollow.

Indeed, there's no appetite for the big cuts that would demand real sacrifices in countries such as Russia, where normal seasonal factors helped it lower production in the first half of the year. Just sticking to current output levels could be difficult for the rest of 2017: early maintenance work has helped several OPEC members meet their targets but that can't continue. Then there's the problem of recovering output from Libya and Nigeria, both exempt from the cuts.

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