– There is a cocktail of factors that have put an upward pressure on prices, more than the geopolitical risk that has already been factored in, including:
- The announcement of OPEC+ top producer to extend or deepen the cuts to September or beyond
- Positive signals on macroeconomic data with some encouraging sings from the US that Fed might achieve a soft landing
- Some signs from China driven by the summer driving reason and a drawdown in inventories
– The announced production cuts are helping OPEC+ in achieving its long-promoted mantra of achieving market stability, where a $80 is regarded as a highly desirable price floor to sustain the Saudi economy.
– Saudi Aramco is still in a strong financial position, despite the drop in Q2 profits. It’s not as astonishing as the results that we saw last year, but this is aligned with the overall industry trend. Also, the decline in production should be factored in.
– We should not expect Saudi Aramco to revert their strategic plan of capital spending, which includes an increase in oil production capacity by 1 million bpd by 2027, doubling their gas production by 2030, and expanding their petchem business. They are also very ambitious in other technologies, such as CCS.
“Oil market: Shifting expectations“, Dr Carole Nakhle, Jul 2023
“The race to tax fossil fuel profits“, Dr Carole Nakhle, Jun 2023
“BP’s 2022 annual results“, Dr Carole Nakhle, Feb 2023
“Shell’s 2022 Third Quarter Profits“, Dr Carole Nakhle, Oct 2022
“Record profits for oil-producers“, Dr Carole Nakhle, Aug 2022