BAKU, Azerbaijan, April 3. The price for Brent may exceed $100 per barrel sooner than expected amid the announcement of voluntary cuts by some OPEC+ members, senior vice president of Rystad Energy Jorge Leon said, Trend reports.
Some OPEC+ countries have expressed intention to cut oil by 1.15 million barrels per day. Saudi Arabia said the voluntary cut is aimed at ensuring oil market stability. Jorge Leon believes that if fully implemented, this cut could lead to even tighter oil market and push the prices to $110 per barrel in the summer. The supply cuts will start from May.
“The voluntary cuts, which the group had has a good track record of implementing, will put upside pressure on prices from a fundamentals perspective, offering support of around $10 per barrel. Still, given the current macro environment, the market may interpret the cuts as a vote of no confidence in the recovery of oil demand and could even carry a downside price risk – but that will only be for the very short term,” he said.
Saudi Arabia will shoulder most of the cuts, reducing production by 500,000 bpd. Other participants are the UAE (144,000 bpd), Kuwait (128,000 bpd), Iraq (211,000 bpd), Oman (40,000 bpd), Algeria (48,000 bpd) and Kazakhstan (78,000 bpd), according to statements from their respective governments. Russia also announced that the existing 500,000 bpd production cut, initially from March to June, will be extended till the end of the year.
Jorge Leon said the fact that all these countries are adhering to the current OPEC+ quotas, with compliance levels at close to 100 percent, implies that the announced voluntary cuts will also most likely be real.
“From a supply side perspective, the cuts signal the group is willing to defend a price floor well above $80 per barrel and prioritize revenue versus market share. From a demand-side perspective, these cuts may be signaling that OPEC+ believes that there are enough recessionary indicators in the market. Any erosion is crude supply will only make the summer product supply-demand balance tight, with a rally in product prices tracking crude,” said the expert.