OPEC Deal Sends Markets Higher, But Oil Remains Flat

In the first such deal since 2008, OPEC agreed on Wednesday to curb oil production in an effort to manage the market. According to reports, OPEC will decrease oil output by about 700,000 barrels per day to 32.5-33.0 million barrels per day which is down from the current production of 33.24 barrels per day. The amount that each country will produce in light of this adjustment will not be decided until the next OPEC meeting in November. At that time, analysts expect that non-OPEC countries will also be encouraged to join the cutbacks. OPEC sources have said publicly that Saudi Arabia is willing to reduce its output from 10.7 barrels per day to 10.2 if Iran agrees to cap its production at the current level of 3.6-3.7 barrels per day, but it is still unclear whether Iran will meet this request.

Analysts across the globe were mixed on their interpretations of the deal, with skeptics saying that the announcement holds little weight without a roadmap for implementation. Nevertheless, oil prices jumped 5 percent on Wednesday night following the announcement, to above $48 per barrel.

Currency Markets React

The Australian dollar, highly influenced by the price of oil, climbed from $0.7650 to $0.7710, before settling slightly lower at $0.7700. The dollar index, howeer, remained relatively stable during the Asian session, trading at 95.435, only slightly better than its prior close at 95.431. The yen fell to 101.32 against the dollar and traders are wondering whether a move below 100 will encourage intervention for the currency. The yen’s weakness sent Japanese export stocks higher, while the move in oil pushed U.S. stocks higher. Traders are hoping for a positive close on Thursday to keep the positive momentum rolling to the end of the third quarter.   

Sara Patterson
Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.