More oil from the cutters but little net increase from OPEC+

If we sum up the latest news we have the following:

1) Deliberate cutters will increase production in 2H18 and 2019
2) OPEC+ will stay together as a group and they will try to strengthen it
3) They will work towards a common statement they can all stand behind
4) Production increase will be gradual and measured matching market conditions

However, net change to total OPEC+ production will be limited as declines in Venezuela and eventually also some declines in Iran will offset increases.

Here is our base case excluding Iran, Venezuela and Bahrain:

Here is our base case including Iran, Venezuela but excluding Bahrain:

So while production from the deliberate cutters within OPEC+ will increase by 1 m bl/d from 1H18 to 2H18 and another 0.5 m bl/d from 2H18 to 2019, there will basically be no net increase in production except for a slight 0.2 m bl/d increase from 1H18 to 2H18.

Chart 1: Global GDP and 6mth/6mth change in Brent crude oil prices. What the graph shows is that global GDP and oil prices are tightly tide together. If the global economy strengthens or weakens then oil prices normally follows that queue. What it probably also tells us is that when oil prices rally then the global economy will hit a soft patch some 6 months later. Oil prices rallied from mid-2017 and six months later from January this year the global economy has weakened. Thus OPEC+ does really, really do not want the oil price to rally to $100/bl in 2H18.