News impacting the oil price - Nov 6
Posted: Mon Nov 06, 2023 10:00 am
Notes from UBS Equity Research Team this morning < Keep in mind that October is month that is usually the lowest oil demand for the year.
Over the weekend, Saudi Arabia and Russia announced that
their voluntary cuts will be extended by another month into
December.
• With oil demand seasonally weakening at the first quarter of
every year, and with OPEC+’s desire to keep the oil market
in balance, we think these cuts are likely to be extended next
month.
• We keep a positive oil price outlook and continue to advise
risk-taking investors to add long exposure via longer-dated
Brent contracts or to sell Brent’s downside price risks.
On Sunday, Saudi Arabia and Russia announced that their voluntary
extra supply cuts will be kept in place for December. Saudi Arabia
is curbing its production again by an extra 1mbpd, and Russia is
reducing its crude exports by 0.3mbpd. Statements from both coun-
tries said the cuts will be reviewed next month to decide whether
they should be extended, deepened, or reduced—depending on
market conditions. We believe these voluntary supply cuts are likely
to be extended into 1Q24—given seasonally weaker oil demand at
the start of every year, ongoing economic growth concerns, and the
aim of producers and OPEC+ to support the oil market’s stability
and balance.
We believe this monthly review process allows Saudi Arabia to
retain control of the oil market, by adjusting its production due to
market fundamentals. Russia’s participation is also important, as the
country is the second largest producer in the OPEC+ group. The
deal ensures close coordination between the two producers.
We continue to expect Brent oil to move back into a USD 90–100/
bbl range, supported by lower oil inventories. OPEC+’s next ordinary
ministerial meeting is scheduled on 26 November in Vienna. We
expect the group to continue to closely monitor China’s incoming
data (as its economic recovery remains a concern despite solid
Chinese oil demand so far), and the impact aggressive monetary
policy tightening may have on economic activity in Europe and the
US.
Over the weekend, Saudi Arabia and Russia announced that
their voluntary cuts will be extended by another month into
December.
• With oil demand seasonally weakening at the first quarter of
every year, and with OPEC+’s desire to keep the oil market
in balance, we think these cuts are likely to be extended next
month.
• We keep a positive oil price outlook and continue to advise
risk-taking investors to add long exposure via longer-dated
Brent contracts or to sell Brent’s downside price risks.
On Sunday, Saudi Arabia and Russia announced that their voluntary
extra supply cuts will be kept in place for December. Saudi Arabia
is curbing its production again by an extra 1mbpd, and Russia is
reducing its crude exports by 0.3mbpd. Statements from both coun-
tries said the cuts will be reviewed next month to decide whether
they should be extended, deepened, or reduced—depending on
market conditions. We believe these voluntary supply cuts are likely
to be extended into 1Q24—given seasonally weaker oil demand at
the start of every year, ongoing economic growth concerns, and the
aim of producers and OPEC+ to support the oil market’s stability
and balance.
We believe this monthly review process allows Saudi Arabia to
retain control of the oil market, by adjusting its production due to
market fundamentals. Russia’s participation is also important, as the
country is the second largest producer in the OPEC+ group. The
deal ensures close coordination between the two producers.
We continue to expect Brent oil to move back into a USD 90–100/
bbl range, supported by lower oil inventories. OPEC+’s next ordinary
ministerial meeting is scheduled on 26 November in Vienna. We
expect the group to continue to closely monitor China’s incoming
data (as its economic recovery remains a concern despite solid
Chinese oil demand so far), and the impact aggressive monetary
policy tightening may have on economic activity in Europe and the
US.
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