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All Signs Point to Supply-Cut Extension
The concept of extending the current OPEC/non-OPEC output cut deal until the end of 2018 has been recently gaining additional support, particularly after "Russian Energy Week", where Russian President Vladimir Putin suggested it. This was followed by OPEC's Secretary General suggesting that producers are leaning towards it, as well as statements by industry officials such as Total's CEO, who said last week that the current output cut deal is starting to bring the global oil market back towards balance, but the agreement will likely need to run until the end of the year to fully draw down the overhang of oil stocks.
The consensus in favour of the supply cut extension is also supported by evaluating current option positioning, with JP Morgan suggesting the market currently ascribes a 33% chance for Brent prices to average below $50 per barrel in December 2018, significantly lower than the 54% chance back in mid-June.