From The Wall Street Journal

They’re making a list, they’re checking it twice, but will oil producers be naughty or nice?

When the Organization of the Petroleum Exporting Countries and its nonmember allies, or “OPEC+,” met in Vienna early last month to shore up the market, their efforts initially fell flat. Crude prices kept dropping until Christmas. The meeting wasn’t the last word, though. Saudi Arabia, playing its traditional role as chief influencer in the cartel, was said to have agreed to a specific export cut—a number that suggested a more aggressive curtailment than originally penciled-in by analysts.

Whether it was this last push or simply the fact that risk-appetite returned to financial markets a few days later, the first mention of quotas came soon before the trough in oil prices, which dropped 40% between Oct. 3 and Dec. 24. Now the full list has been published.

Will traders buy the rumor and sell the fact? While there is no reason to expect cheating—or at least not more than usual for OPEC—the 27% rally in benchmark U.S. crude futures from the pre-Christmas bottom through Friday creates a different moral hazard.

Quotas or not, the 1.2 million barrel a day output cut of the OPEC+ group came from an elevated level. Aside from Iran and Venezuela, which are experiencing falling exports involuntarily, both the Gulf members of OPEC and Russia had boosted output in the third quarter. Moreover, the next OPEC+ meeting is now less than three months away.

The real test of the cartel’s discipline will be how eager members are to deepen the cuts, as some have hinted. The higher oil prices go, the greater the temptation to leave well enough alone, possibly choking off the price recovery.

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