‘OPEC+ Takes on the West’, ‘Very Bullish’… Commodity Strategists React to Oil Output Cuts By Investing.com

By Senad Karaahmetovic 

OPEC+, consisting of OPEC international locations and their allies, stunned the market yesterday by asserting 2 mb/d output cuts and sending oil costs larger.

Crude oil costs closed practically 2% larger to mark the third consecutive day of beneficial properties that extends the rebound from September lows to over 15%. JPMorgan strategists famous that such output cuts may take oil costs to $100/bbl this quarter.

Different strategists, equivalent to Citi’s strategists, imagine that the two mb/d headline cuts may really be only one mb/d in actual phrases.

“This headline 2-m b/d minimize to output targets may translate right into a ~1.1-1.2-m b/d bodily minimize to precise OPEC+ output, which incorporates some 250-k b/d from lagging producers, so the efficient minimize may even be slightly below 1-m b/d in case of poor compliance,” the Citi strategists wrote in a consumer observe.

This is what different prime commodity strategists need to say about yesterday’s developments.

Goldman Sachs: “This end result is subsequently surprisingly bullish… If sustained by Dec-23 subsequent yr, such cuts would quantity to $25/bbl upside from our earlier 2023 $107.5/bbl Brent forecast, with potential for value spikes even larger ought to inventories absolutely deplete, requiring demand destruction as a final resort. This end result is probably going unsustainably bullish in our view.”

UBS: “We proceed to carry a constructive outlook for oil costs. With oil demand benefiting from gas-to-oil switching this winter, the doubtless finish of OECD releases of strategic oil reserves and the European ban on waterborne Russian crude imports coming into drive on 5 December amid decrease OPEC+ crude manufacturing, we anticipate the oil market to tighten additional. As such, we proceed to anticipate Brent to maneuver above the USD 100/bbl mark over the approaching quarters.”

Morgan Stanley: “OPEC’s quota discount dangers tightening oil markets considerably. A lot depends upon the trajectory for Russia’s oil manufacturing as soon as the EU embargo comes into drive, however on our base case forecasts, we now see the oil market practically 1 mb/d undersupplied as soon as once more in 2023.”

As of 08:15 ET (12:15 GMT), costs are down 0.8%.