Oil Spikes After OPEC Announces It Has "Reached A Deal To Limit Oil Production"; Execution to take place in November.

As was leaked earlier today by Reuters, which reported that OPEC could announce an output-freeze deal on Wednesday in Algeria, although full details are unlikely to be firmed up before a formal meeting of the Organization of the Petroleum Exporting Countries in November, moments ago Reuters blasted that this is precisely what OPEC has decided at its Algiers meeting, when it announced that a deal to limit oil production has been reached, however the execution won't take place for another two months.

• OPEC REACHES DEAL TO LIMIT OIL PRODUCTION, EXECUTION IN NOV - OPEC SOURCE

Oil, as expected on this latest attempt to spark a headline driven buying frenzy, has surged on the news, and was up 4% at last check, some $1.75 higher, trading at $46.40 even though it remains unclear just how - if at all - a "supply freeze" takes place when practically all members who are not producing at capacity such as Iran and Nigeria will be granted an exemption.

 

Incidentally, the "deal" which is really a deal to meet again in November as nothing will be "executed" until then,comes at a time when Russia, the world’s largest energy exporter, just reported it is on course to pump a post-Soviet record amount of oil in September, adding as much as 400,000 barrels a day to the country’s production. The output surge comes as OPEC nations meet in Algeria, with discussions to curb a global surplus at the top of their agenda.

Russian crude and condensate production is set to average 11.1 million barrels a day this month, compared with 10.7 million barrels a day in August, according to preliminary Energy Ministry data compiled by Bloomberg. That would surpass the 10.9 million barrels a day January production level, which officials considered as a potential cap during failed talks among producer nations in April.

This means that as OPEC is padding itself on the back for pushing the price of oil higher, what is really happening is that both OPEC and non-OPEC producers are on pace to "freeze" production at all time high levels, and meanwhile shale production is also set to ramp up now that the price of oil may once again trend higher.

As to Russian production, it has every opportunity to continue growing, potentially adding another 2-3 percent over the next 12 months if the government doesn’t raise taxes on the industry, according to Artem Konchin, an oil analyst at Otkritie Capital in Moscow. Rosneft and Lukoil, the nation’s two largest producers, have shifted their guidance on output to positive territory as they start new fields and increase spending on core production in Siberia, he said in an e-mail.

“If the freeze happens at current levels, then the bar is obviously higher,” Konchin said. “Technically, I’m not sure how that whole thing will be implemented -- no one is sure.”

The details don't matter: for now the algos are buying because other algos are buying. :)