OPEC deal boosts financial markets in frontier oil exporters

Financial markets in frontier oil exporters have performed well over the past month, as oil prices have rallied following the OPEC deal to cut output. Equity markets have perked up. And spreads of dollar-denominated bonds have narrowed, which has partially offset the rise in underlying US Treasury yields since Donald Trump’s election in November. For our part, though, we remain cautious about the OPEC agreement. After all, Saudi Arabia, de-facto leader of the cartel, has agreed to a cut in production that is not drastically out of line with seasonal fluctuations. And the usual caveats abound with respect to compliance with the deal. As much as anything, we suspect that the Kingdom agreed to take some action simply to prevent the OPEC meeting ending in acrimony.