Crude Oil Price[1] Analysis & News
- OPEC Meeting in Focus: How Much Will Production Increase?
- Monitoring OPEC Developments
- Brent Crude Oil Levels to Watch
OPEC Meeting in Focus
The first of today’s main risk events is the OPEC meeting where the oil cartel, alongside non-OPEC members, will look to ease production quotas following a brighter oil outlook, in part due to the success of the global vaccine rollouts, which in turn has prompted a sizeable rally in oil prices. The key question for today’s meeting is how much will oil production quotas be relaxed.
However, in light of yesterday’s OPEC source reports that a rollover of current production caps is on the table, there are now three potential outcomes.
- The most likely scenario in my view is that OPEC+ will relax quotas by 500kbpd, delighting Russia who has been an advocate for boosting production, while Saudi Arabia unwinds their additional 1mpbd cut by 500kbpd also. This would be the least volatile outcome as it does not favour either bulls or bears in the short run.
- The bull scenario would be the abovementioned rollover of existing cuts, which I see as the lowest probability outcome
- The bear scenario in the short run would be for a 500kbpd increase by OPEC+ and Saudi Arabia to unwind the entirety of their additional cuts.
A reminder that following last months 20% increase in Brent crude prices, oil is now trading within close proximity to Saudi Arabia’s estimated fiscal breakeven price of $67/bbl, therefore, it is unlikely that Saudi in particular will want to put a stop to the current trend and thus remain cautious in their approach to bringing oil back onto the market. Alongside this, with the buzzword of a commodity supercycle doing the rounds, OPEC will be
