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Tue Nov 28, 2017, 05:08 PM

OPEC won't deliver the 9-month extension to output cuts the market is expecting, Citi warns

Oil producers are unlikely to extend their deal to limit production by nine months, according to Citi Research.

Traders are expecting the extension through 2018 and will likely sell out their positions in crude futures if OPEC only extends the deal by six months or puts off the decision, Citi warns.

Russia's domestic policy is the main stumbling block, while Saudi Arabia will fight for the nine-month extension, Citi says

Oil producers are unlikely to extend a deal to cap their output by nine months, a move that could result in a sharp pullback in prices, Citi Research analysts warned on Tuesday.

Citi made the call just two days before OPEC and other oil exporters led by Russia are due to deliver the closely watched decision in Vienna, Austria. Analysts say current oil prices reflect the market's expectation the deal will be extended through the end of next year.

"Our expectation is that something short of a nine-month extension is delivered, likely either a shorter extension or a deferral of the decision until" the first quarter of 2018, when the deal is set to expire, Citi analysts wrote in a research note on Tuesday.

If Citi's call is correct, it expects traders to liquidate their crude positions, leading to a sell-off likely to exceed the $3 per barrel swing in May when OPEC's last meeting disappointed the market.

https://www.cnbc.com/2017/11/28/opec-wont-give-the-market-the-opec-extension-its-expecting-citi-warns.html

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