The OPEC Plus, which consists of the Organization of the Petroleum Exporting Countries (OPEC) and major oil-producing countries that are not members of the Organization of the Petroleum Exporting Countries (OPEC), decided to coordinate production cuts on the 2nd, and the outlook for crude oil prices was forced to be revised. $100 a barrel is back in sight.
OPEC Plus Surprise Collaborative Production Cuts – Exceeding 1 Million Barrels per Day from May (2)
The cuts came after OPEC signaled it needed to increase production in the second half of the year, not cut it. The International Energy Agency (IEA) expects demand to surge this year and OPEC+ production cuts that caught markets off guard have raised new inflation risks for the global economy.
“There is a bullish scenario,” said Bob McNally, a former White House official who heads Rapidan Energy Group Inc. “If they cut into a bullish scenario, they will pass $100 a barrel very quickly,” he said in an interview with Bloomberg TV on Wednesday.
North Sea Brent Crude Oil Futures
Source: ICE Futures Europe
The weekend’s production cut announcement shocked traders and analysts and put oil market short sellers on edge. Brent crude, an international benchmark, rose more than 8% at one point in trading on Thursday.
The announcement of the production cut came as a big surprise because the crude oil market was recovering from the slump in the first quarter (January-March), and OPEC+ ministers announced that they would stick to production targets throughout the year. It is also behind the fact that
reversal
But OPEC+ has been caught off guard before. Helimah Croft, chief commodity strategist at RBC Capital Markets, has even called Saudi Energy Minister Abdul Aziz a “prince of twists and turns.”
Although the previous unexpected production cut was criticized, the approach proved to be justified in the end. Last October’s agreement to cut production by 2 million barrels per day preempted a softening in global demand, and without the cut, oil prices may have fallen further.
OPEC+’s decision was driven by the global economic downturn and banking crisis.
“There are a lot of uncertainties right now, and that was pointed out at the meeting,” Russian Deputy Prime Minister Novak said in an interview with Russia 24 after the online meeting of the OPEC+ Joint Ministerial Monitoring Committee (JMMC). “We expect the European and US banking crises to have a strong impact on the oil market,” he said.
“OPEC+ actions are clearly focused on supporting a further weakening market,” Citigroup analysts led by Ed Morse said in a note. “Given market positioning and short covering, a market rally seems inevitable.
Original title:Shock OPEC+ Oil Production Cut Puts $100 a Barrel on Horizon (1)(excerpt)
