The most likely outcome of the next OPEC and non-OPEC meeting is for the group to maintain its current production schedule.
That’s the view of analysts at BMI, a Fitch Solutions company, according to a new report sent to Rigzone this week, which notes that the group’s next meeting is scheduled for October 4.
“Oil is now trading at a healthy level and consensus expectations are for a sustained deficit in the market over the coming months,” the analysts said in the report.
“Also, further price gains could prove to be a mixed blessing for the group, bolstering earnings in the near term and jeopardizing demand next year,” they added.
“That said, given that the global economy is slowing, the group will likely want to maintain its current cuts, while indicating scope for further reductions, should market conditions warrant,” they continued.
Analysts noted in the report that they expect OPEC+ to “continue its tight market management” in the fourth quarter of 2023 and 2024.
In a separate report sent to Rigzone this week, analysts at Standard Chartered also weighed in on the upcoming OPEC+ meeting.
“We see no reason for producers to be less cautious, given that asset markets in general have recently been affected by growing uncertainty about central bank policies and concerns about the economic outlook in the US, Europe and the China,” analysts said in that report. .
“In particular, we believe it is too early for the market to start factoring in any reduction in Saudi Arabia’s voluntary production cuts. Although recent price movements have been heavily distorted by the expiration of the contract in a heavily lagging market, the demonstration that the price of Brent can fall from more than $97 per barrel to less than $90 per barrel in less than four trading days is likely to reinforce caution.” they added
“We believe that many producers are also of the view that once the sharp lag at the front of the curve is removed and the effects of excessive speculative duration are taken into account, current prices remain fragile and, given fundamental balances current, too low,” said Standard Chartered analysts.
critical role
The OPEC+ deal has played a critical role in price action year-to-date, BMI analysts noted in the company’s report.
“In May, the group enacted a cut of 1.16 million barrels per day, which is currently being bolstered by an additional voluntary cut of 1.3 million barrels per day by Saudi Arabia and Russia, which will remain until the end of the year.”, highlighted the analysts in the report.
“While Russia showed strong compliance with its cuts over the summer months, the most recent trade data suggests that marine crude exports rose significantly in September, calling into question its commitment to the cuts “, they added.
“However, at 300,000 barrels per day they represent only a small part of the total and we expect Saudi Arabia and other major Middle Eastern producers to continue to comply strongly,” they continued.
Analysts also noted in the report that Russia “could provide further support to the market, following the introduction of the diesel export ban on September 21.”
“Under the terms of the ban, Moscow has cut most of its exports of 1 million barrels per day, with some minor exemptions, including flows to the Eurasian Economic Union,” the analysts said in the report .
“This could increase demand for ex-Russia crude as other refiners try to increase supplies to plug the shortfall. The impact on prices will depend on the length of the ban, which is not expected to be long,” they said. add.
“However, middle distillate markets are already tight, struggling with unplanned refinery outages, feedstock issues and extreme weather to meet rising global demand,” the analysts said.
OPEC+ meeting
Although OPEC’s website currently does not show any imminent meeting, a statement posted on the group’s website on August 4, following the 49th Meeting of the Joint Ministerial Monitoring Committee (JMMC), revealed that the The 50th meeting of the JMMC was scheduled for October 4.
“The committee will continue to closely assess market conditions, taking into account the willingness of the DoC (Declaration of Cooperation) countries to address market developments and be ready to take additional measures at any time, based on the strong cohesion of OPEC and non-OPEC oil-producing countries,” the statement said.
“The committee also expressed its full appreciation and support for the Kingdom of Saudi Arabia’s efforts to support oil market stability and reiterated its appreciation for the Kingdom’s additional voluntary cut of one million barrels per day and to extend it for the month of September,” he added.
“The committee also recognized the Russian Federation for its additional voluntary reduction in exports by 300,000 barrels per day during the month of September,” it continued.
To contact the author, please send an email andreas.exarcheas@rigzone.com
