Brent recovered from session lows and is anchored to $40 per barrel into the New York close, but traders are still waiting for clarification on OPEC free-rider dispute.

The primary point of contention is centred on Iraq and Nigeria’s long-standing non-compliance to virtually all of OPEC + production deals as Russia and Saudi are right to take steps to ensure the burden of cuts is distributed equitably.

Whether this dispute should have made its way into the public domain is another question. It would have been far more suitable from a price perspective to present a unified front and have the free-rider dust-up during the video call to avoid the perception that tensions are emerging within the group.

Despite the volumes of ink being spilt, the free-rider story has failed to move the needle to any significant degree, suggesting that the market is confident that any difficulties will be resolved by the time the meeting takes place.

Still, with Brent unable to make significant headroom above $40 overnight, this new element of uncertainty appears to be temporarily holding bulls at bay.


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Conspicuously the free-rider clamp down story emerged just after EOG and Parsley Energy flagged earlier in the week they were preparing to restore shut-in production in the wake of the sharp rally in WTI.

Indeed, the razor-sharp oil price recovery might very well have raised some concerns among OPEC+ producers that highly reactive and prices sensitive US producers will turn on the taps quickly and eat into OPEC + share of the pie.

The markets remain confident that Saudi Arabia and Russia will see eye-to-eye, and Iraq and Nigeria will provide the necessary lip service to breach this low bar to a production cut extension.

So now the critical risk for markets from here will be how US shale producers respond to the rebound in oil prices.

Going forward, however, for the market concerns, it essential that OPEC + maintains focus on the factors they can control as the next meeting draws closer, which is to merely confirm the supply extension and the markets can go merrily along the way until next month when we will probably do this all over again.

Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp