OPEC stays the course

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KGardiner
Posts: 110
Joined: Mon Feb 08, 2021 5:18 pm

OPEC stays the course

Post by KGardiner »

I see OPEC decided to stick to the steadily rising production quotas.
Not sure how this would have played out if Omicron Fear wasn't present.


https://oilprice.com/Energy/Crude-Oil/O ... lunge.html

Kevin
Fraser921
Posts: 2954
Joined: Mon Mar 22, 2021 11:48 am

Re: OPEC stays the course

Post by Fraser921 »

Talk is cheap, lets see what they do. Opec+ is not going to push prices any lower than $60-65

Maybe Biden changes his mind and the whole thing was a head fake
Orindakid
Posts: 92
Joined: Wed Mar 09, 2016 8:01 pm

Re: OPEC stays the course

Post by Orindakid »

They have already pulled over 25 M Barrels out from the Jan 20 Level.

https://www.eia.gov/dnav/pet/hist/LeafH ... SSTUS1&f=W
Fraser921
Posts: 2954
Joined: Mon Mar 22, 2021 11:48 am

Re: OPEC stays the course

Post by Fraser921 »

He just announced it last Friday so that's on top of what they done YTD.

I don't think they dumped anything of the new supply most of that gets exported anyways. So just pure manipulation of the markets and they said they may adjust it if prices came down which they did (for other reasons, ie Covid)
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: OPEC stays the course

Post by dan_s »

Martijn Rats, CFA – Morgan Stanley
December 2, 2021 10:12 PM GMT

OPEC's decision to continue its production hikes was unexpected, but the group has left the meeting 'in session' suggesting it can respond quickly.

Following the recent correction, much is 'in the price' by now. Balances look softer for 1H22 but should still strengthen meaningfully in 2H22.

Counter to expectations, OPEC quota increases continue: Heading into today's OPEC+ meeting, we had expected that the producers group would pause it scheduled production increase of 400 kb/d for the month of January. Alas, this did not materialise. For now, OPEC+ continues with its existing agreement but took the unusual step to leave the meeting 'in session', suggesting it will continue to monitor market conditions and could take action at short notice.

Impact on balances is modest: Following this outcome, we update our OPEC+ production forecast which now shows 270 kb/d growth from Dec-to-Jan – still not the full 400 kb/d given limited capacity in several member states. Across 1Q22 however, this moves our balances by just 0.1 mb/d. We previously modelled a small undersupply of 0.2 mb/d, which is now 0.1 mb/d – a marginal change.More interesting is what it signals: OPEC's decision to continue with its planned production hike course could indicate several things, specifically two.
First, it could suggest that OPEC is not all that worried about the demand impact of the Omicron variant. Seemingly, OPEC feels confident that there is demand for the extra supply it is planning to bring to market.
Second, it also could suggest a more cooperative stance from OPEC towards the US administration and its requests to cool down the oil market. That is not what it looked like over the last few weeks, but perhaps this has changed.

Much is 'in the price' already: In response to the OPEC announcement, the Brent flat price briefly fell to $66/bbl intraday. However, the fact that this has already recovered above $70/bbl at the time of writing is noteworthy. Also, in our note on Monday, we used the historical correlation between time spreads and OECD inventories, expressed in days of forward demand, to highlight that the flattening of the Brent forward curve already reflected a ~4 mb/d drop in oil demand. Since then, the forward curve has flattened even marginally further and as shown in 1, the current position relationship between Brent time spreads and inventory cover of demand remains a historical outlier. Both observations show that the oil market is already positioned for a significant weakening.Medium term bullish drivers still in place: With three of our four short-term timing indicators in negative territory (see 35 and 36), it will probably take some time for the market to find its footing again. Also, on our estimates, the oil market balance is softer in 1H22 than in 2021 due to the typical seasonal profile in demand as well as post-covid supply recovery in both OPEC and non-OPEC. However, the oil market will likely return to undersupply and inventory draws from mid-2022 onwards.

With upstream capex continuing to run at low levels, our initial read on 2023 balances suggest this will continue then. With that prospect, we suspect that the long end of the Brent curve will stay supported. Unless demand weakens much more due to Omicron than we currently expect, the current low inventory cover supports a more backwardated forward curve as well. Combined, this suggests the risks to oil prices are skewed higher from here.
Dan Steffens
Energy Prospectus Group
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