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The most likely outcome of the next OPEC and non-OPEC meeting is that the group holds to 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 highlighted 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.
“Moreover, further price gains could prove to be a mixed blessing for the group, bolstering near-term revenues while endangering demand next year,” they added.
“That said, given that the global economy is slowing, the group will likely want to maintain their current cuts, while signposting the scope for further reductions, if market conditions demand it,” they continued.
The analysts highlighted in the report that they expect OPEC+ to “continue in its close management of the market” over the fourth quarter of 2023 and into 2024.
In a separate report sent to Rigzone this week, analysts at Standard Chartered also looked at the upcoming OPEC+ meeting.
“We see no reason for producers to become less cautious, given that asset markets in general have recently been affected by rising uncertainty about central bank policies and concerns over economic prospects in the U.S., Europe, and China,” the analysts said in that report.
“In particular, we think it is too early for the market to start to factor in any reduction in Saudi Arabia’s voluntary output cuts. While recent price movements have been heavily distorted by contract expiry in a steeply-backwardated market, the demonstration that the headline Brent price can fall from above $97 per barrel to below $90 per barrel in less than four trading days is likely to reinforce caution,” they added.
“We think many producers also take the view that once the steep front-of-the-curve backwardation is stripped away and the effects of over-extended speculative length factored in, current prices remain both fragile and, given current fundamental balances, too low,” the Standard Chartered analysts went on to state.
Critical Role
The OPEC+ deal has played a critical role in price action in the year to date, analysts at BMI noted in the company’s report.
“In May, the group enacted a 1.16 million barrel per day cut, which is currently being reinforced by an additional 1.3 million barrel per day voluntary cut by Saudi Arabia and Russia, both of which will be held in place until the end of the year,” the analysts highlighted in the report.
“While Russia showed strong compliance with its cuts over the summer months, more recent trade data suggests that seaborne crude exports rose significantly in September, raising questions over its commitment to the cuts,” they added.
“However, at 300,000 barrel per day they represent only a small share of the total and we expect to see continued strong compliance by Saudi Arabia and other large Middle Eastern producers,” they continued.
The analysts also outlined in the report that Russia “could offer some further support to the market, following the introduction of its diesel export ban on September 21”.
“Under the terms of the ban, Moscow has cut off the bulk of its one million barrel per day exports, with a few minor exemptions including flows to the Eurasian Economic Union,” the analysts said in the report.
“This could raise demand for crude ex-Russia, as other refiners attempt to ramp-up supplies to plug the deficit. The price impact will be contingent on the ban’s duration, which is not expected to be lengthy,” they added.
“However, middle distillate markets are already tight, battling unplanned refinery outages, feedstock issues and weather extremes to meet rising global demand,” the analysts went on to state.
OPEC+ Meeting
Although OPEC’s website does not currently show any impending meetings, 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 50th JMMC meeting was scheduled for October 4.
“The committee will continue to closely assess market conditions noting the willingness of the DoC (Declaration of Cooperation) countries to address market developments and stand ready to take additional measures at any time, building on the strong cohesion of OPEC and participating non-OPEC oil-producing countries,” the statement said.
“The committee also expressed its full recognition and support for the efforts of the Kingdom of Saudi Arabia aimed at supporting the stability of the oil market and reiterated its appreciation for the Kingdom’s additional voluntary cut of one million barrels per day and for extending it for the month of September,” it added.
“The committee also acknowledged the Russian Federation for its additional voluntary reduction of exports by 300,000 barrels per day for the month of September,” it continued.
To contact the author, email andreas.exarheas@rigzone.com
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