- Oil advances for a second day after OPEC+’s surprise production cut
- May ’23 WTI gained 76c this morning to trade around $81.18/Bbl
- Both crude benchmarks climbed over 6% on Monday following OPEC’s new 1.66 MMBb/d output cut
- The latest announcement brings the total volume of cuts by OPEC+ to 3.66 MMBbl/d, including October's 2 MMBbl/d, equal to about 3.7% of global demand
- However, summer driving may boost demand near term, but high oil prices could cause inflation, rate hikes, and potentially dampen demand
- Kurdistan regional government to sign Iraq deal today to resume its 0.4 MMBbl/d oil exports
- OPEC+ cut may prompt Asian buyers to reconsider strategy (SPGlobal)
- Leading buyers like China and India may be less impacted due to the ongoing flows of Russian crude, but other Asian buyers may have to consider other alternatives
- Asian refiners, including South Korea and Japan, depend on Middle Eastern crude. Higher benchmark oil prices or spot premiums for Middle Eastern crude could affect fuel demand and Asian consumer confidence
- China's 2Q2023 demand recovery is expected to be slow as maintenance season begins, offsetting the bullish impact of the OPEC+ cuts in the near term
- In 2H 2023, however, the cuts might tighten supply as China is expected to see accelerated demand recovery
- OPEC+ likely aimed to hurt oil short-sellers with the surprise cut (BBG)
- The decision to hold back over a million barrels of oil from the market was made quickly and in a tight circle of people, said delegates
- Many delegates found out just a day or two before the announcement
- While the move was successful in catching short sellers off guard, it also impacted consumers and the global economy, causing concerns about inflation and prompting bets on further interest rate hikes
- The decision to hold back over a million barrels of oil from the market was made quickly and in a tight circle of people, said delegates