OPEC+ makes shock million barrel cut

Key takeaways:

1. Although the announcement surprised many, OPEC+ couldn’t have simply watched oil prices hovering around the low 70s (US$/bbl) for too long without reacting, especially in the light of changing market sentiment.
2. The response of the White House was much milder than what we saw in Oct last year when OPEC+ announced 2Mb/d cuts. Today’s “Ill advised” and President Biden’s “not as bad as you think” are a far cry from “there will be consequences” back then (no midterm elections!).
3. Whatever other OPEC+ members cut, Russia does not have to cut and thus benefits from the higher oil prices without having to sacrifice its market share.
4. Chinese oil demand has not roared back with vengeance as many expected following the abandonment of zero covid policies in the country. The growth has been lower than what was originally expected.
5. Oil demand is not well understood. It is shaped by many factors including the economic outlook which is currently notably uncertain.
6. Price forecasts will continue to be revised accordingly, as they have always been. They can be as accurate as the weather forecast!