OPEC+ Production Cuts will push oil prices higher - Apr 11
Posted: Tue Apr 11, 2023 9:51 am
From Bloomberg: OPEC+ is winning its war against short-sellers.
The coalition led by Saudi Arabia said that last week’s
shock decision to slash oil production was intended to punish
speculators and deter them from making unwarranted wagers
against crude prices. If that was the rationale, then the latest
data show the group succeeded.
Money managers slashed short-positions in Brent crude by
29,118 contracts in the week to April 4, the sharpest drop since
2020, according to data from ICE Futures Europe. In percentage
terms, last week’s 46% reduction is the biggest in data going
back to 2011.
The Organization of Petroleum Exporting Countries and its
allies pledged more than 1 million barrels a day of cutbacks
starting in May after fears over banking turmoil and faltering
economic growth led to a pile-up of short positions, dragging
crude prices down to $70 a barrel last month.
The market promptly recovered, with futures trading near
$84 a barrel in London on Tuesday. While the move drew criticism
from Washington amid concerns over resurgent inflation, the
higher price levels should help many OPEC+ nations cover
government spending.
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MY TAKES:
> Saudi Arabia will defend the oil price and they definitely want (and need) Brent to go higher.
> OPEC+ could care less what Team Biden wants. Biden's decision not to refill the SPR when WTI dipped below $70 caused Saudi Arabia to push for the production cuts. Saudi Arabia will do what is best for their country. Biden has screwed up a relationship that is very important to our economy and national security.
> This week's IEA "Oil Market Report" should show that demand for oil-based products is going to exceed supply by over 2 million bpd starting in June.
The coalition led by Saudi Arabia said that last week’s
shock decision to slash oil production was intended to punish
speculators and deter them from making unwarranted wagers
against crude prices. If that was the rationale, then the latest
data show the group succeeded.
Money managers slashed short-positions in Brent crude by
29,118 contracts in the week to April 4, the sharpest drop since
2020, according to data from ICE Futures Europe. In percentage
terms, last week’s 46% reduction is the biggest in data going
back to 2011.
The Organization of Petroleum Exporting Countries and its
allies pledged more than 1 million barrels a day of cutbacks
starting in May after fears over banking turmoil and faltering
economic growth led to a pile-up of short positions, dragging
crude prices down to $70 a barrel last month.
The market promptly recovered, with futures trading near
$84 a barrel in London on Tuesday. While the move drew criticism
from Washington amid concerns over resurgent inflation, the
higher price levels should help many OPEC+ nations cover
government spending.
---------------------------------
MY TAKES:
> Saudi Arabia will defend the oil price and they definitely want (and need) Brent to go higher.
> OPEC+ could care less what Team Biden wants. Biden's decision not to refill the SPR when WTI dipped below $70 caused Saudi Arabia to push for the production cuts. Saudi Arabia will do what is best for their country. Biden has screwed up a relationship that is very important to our economy and national security.
> This week's IEA "Oil Market Report" should show that demand for oil-based products is going to exceed supply by over 2 million bpd starting in June.