- The outcome of OPEC+’s meeting that has captured most attention is Saudi Arabia’s voluntary cut of 1 Mb/d, which can be extended depending on market conditions.
- Saudi Arabia’s proclaimed ‘lollipop to the market’ can actually be seen as an attempt by OPEC+ leadership to maintain the group’s cohesion, especially following the downward revisions to baseline production of several members.
- Those cuts come at a cost for Saudi Arabia as they bring its production to 9 Mb/d – a low by historical standards. However, if the consequence is higher oil prices, then the loss of the market share would be compensated for with higher revenues.
- While OPEC+ has a big market share, they are not the only movers and shakers in oil markets. Both non-OPEC supply and demand have responded to higher prices with the latter still affected by a low beat economic outlook.
- Some argue that Saudi Arabia is after at least $US 80/bbl price floor. That number is what the International Monetary Fund highlighted as the price needed to balance the Saudi budget. We shouldn’t, however, inflate the importance of the so-called fiscal breakeven oil price as economies can still function with a budget deficit.
- Oil price forecasts have consistently proven their unreliability and inaccuracy.
- Volatility in the markets is still expected to continue with prices unlikely to break the range they are currently trading at.
“OPEC+ makes shock million barrel cut“, Dr Carole Nakhle, Apr 2023
“Saudi Arabia transfers 4% of Aramco to PIF’s Sanabil“, Dr Carole Nakhle, Apr 2023