On Wednesday, at the end of the International Energy Forum (IEF) in Algiers, OPEC announced that they'd agreed to cut oil production.

Oil shot up almost 6%, and media outlets were filled with talk of OPEC's "comeback."  Then, once analysts had time to look at the details, there was a backlash. And you can certainly see why they'd think this deal is less than it seems. Let's start with the "cut."

OPEC ministers said that they'd agreed to cut oil production to somewhere between 32.5 to 33 million barrels a day, down from about 33.24 million barrels a day.

Now, the fact that the ministers agreed to a range, instead of a concrete production target, is telling enough. Clearly, more negotiations are needed. Second, this range would only "cut" oil production back to the levels from January, which were already near all-time highs. Remember, these were the production levels that the failed April Doha oil deal would have used, too.

But perhaps the most important problem with the deal is this: there was no mention of which country was going to cut their production by how much. Without quotas for individual OPEC members, and a way to punish countries that exceed their quotas, there's simply no way OPEC as a whole will cut its production.

And these quotas, OPEC ministers said, would be agreed on later in November. In other words, as I predicted last week, no real oil deal was announced. But that doesn't mean this was a failure. On the contrary, this roadmap to a full OPEC-Russia deal on capping oil production was more or less the best we could have expected.

And once a detailed and specific oil deal emerges at OPEC's November meeting, oil prices will respond even more positively than they did on Wednesday.
In fact, this could be a game-changer for oil. Not to mention for well-situated U.S. oil companies...I'll keep you updated on any OPEC negotiations leading up to the November meeting.