The Ripple Effect: OPEC's Breakdown and Global Macroeconomic Consequences

The breakdown of OPEC+ talks could have significant macro effects, potentially leading to a sharp decline in oil prices and disinflationary pressures. The main sticking point in the negotiations is country quotas, particularly in Africa. If OPEC+ fails to reach an agreement, there is a risk of material downside in oil prices, potentially falling into the $50s range. This would undermine the argument for "sticky" inflation. Potential trades in response to a breakdown in OPEC could include buying bonds, selling the US dollar, and buying equities. The odds of a breakdown are currently estimated at around 1-2%, but recent OPEC headlines have increased the likelihood.