- OPEC+ has simply made the || اوپیک + نے آسانی سے بنایا ہے. Several OPEC+ members announced on Sunday their intention to cut another 1.16 million barrels per day of production voluntarily, in a move unrelated to the broader bloc’s output strategy.
- The reductions will be difficult for consumer governments, such as the United States, which is already dealing with high inflation and volatility in the banking sector.
- On Monday, an OPEC+ technical committee met in formal session to review the group’s current strategy.
OPEC+ has simply made the Fed’s job more difficult.
- Several OPEC+ members plan to cut global output by 1.16 million barrels per day until the end of the year, adding to central banks’ efforts to curb global inflation while also protecting the alliance’s broader output strategy from political pressures.
- Washington has weighed in on Sunday’s announcement by eight OPEC+ producers, including group leader Saudi Arabia and key allies Kuwait and the UAE, that they would remove more than a million barrels per day from global oil markets as part of a separate initiative unrelated to OPEC+ policy.
- This adds to Russia’s existing plans to cut 500,000 barrels per day from February output levels until the end of the year, bringing the total voluntary cuts of OPEC+ members to over 1.6 million barrels per day.
- “Given market uncertainty, we don’t think cuts are advisable at this time — and we’ve made that clear,” a National Security Council spokesperson told Reuters.
- The administration of US President Joe Biden has repeatedly chastised the OPEC+ group for its production cuts, citing the inflationary toll on households and accusing it of colluding with sanctions-hit Russia. Production restrictions cause a reduction in supply, resulting in higher petrol prices in importing countries, which boosts headline inflation.
- Relations with OPEC+ chair Saudi Arabia devolved into a verbal war at the end of last year, when the oil group agreed to a 2 million barrel per day cut until the end of 2023 — a decision that has since been upheld by ministerial and technical committees.
- The OPEC Secretariat described the voluntary cuts as “a precautionary measure aimed at supporting the oil market’s stability.”
- The JMMC will meet again on June 4, followed by a full ministerial meeting.
- Brent front-month futures were up $4.44 per barrel from Friday’s close to $84.33 per barrel at nearly 10 a.m. London time, formal group action is arguably no longer required (5 a.m. ET). Some analysts predict that prices will rise to $100 per barrel, while Goldman Sachs expects Brent to rise by $5 per barrel to $95 per barrel. in December 2023.
- Oil prices are expected to rise for the rest of the year as a result of these voluntary cuts, fueling global inflation and prompting central banks around the world to raise interest rates. ” raise interest rates.” raise interest rates.” raise interest rates.” raise interest rates.” raise interest rates.” raise interest rates.” raise interest rates.” raise interest rates.” take a more hawkish stance on interest rate hikes.” “However, this would slow economic growth and reduce oil demand growth,” said Rusted Energy’s Victor Pons ford.
Oil jumps as OPEC and its allies announce a surprise output cut”
- Tamas Varga of oil broker PVM warned CNBC about the broader political risks of the organised voluntary cuts, predicting that headline inflation would rise faster than anticipated.
- Central banks, on the other hand, may not deviate from their current course of slowing borrowing growth because their views are primarily shaped by core inflation figures, which are less affected by higher oil prices than headline data,” he said.
- “Supporters of the NOPEC bill in the US Congress will also speak up, accusing OPEC+ of using oil as a weapon.” The move is unequivocally bullish, as supply concerns have surpassed macro concerns. The move will also worsen the deterioration of the Saudi-American relationship.”
- The NOPEC bill (No Oil Producing and Exporting Cartels) refers to proposed US legislation that would subject OPEC+ countries to potential antitrust legal action.
- The US can try to combat price increases by releasing more volumes from its Strategic Petroleum Reserve, but according to one anonymous OPEC+ delegate, Washington has hampered its fight against inflation by blocking global access to Venezuelan and Iranian volumes, while EU nations also refrain from purchasing Russian oil in solidarity with the invaded Ukraine.
- OPEC+ delegates have previously criticized Western nations’ windfall taxes on energy companies, claiming that they received no consistent support when WTI futures traded in negative territory in April 2020, as well as the accelerated shift to renewables, which has reduced hydrocarbon investments while failing to produce enough alternative green fuel to fully meet consumer demand.
- “What happened to oil prices in the last three weeks had nothing to do with oil factors; it had everything to do with the banking crisis and the fears it engendered.” “We also had a huge, huge increase in [the] short market, which OPEC is keen to stomp out,” Amrita Sen, co-founder and director of research at Energy Aspects, told CNBC’s Dan Murphy.
- Short positions are typically taken by investors when they anticipate market or price declines.
- “I believe they will reverse this cut along the line if the market overtightens or exogenous issues or shocks fade.” So it’s not set in stone for the rest of the year, but it’s very clear that we’re defending a floor.”
OPEC is very clearly defending a floor with surprise output cut: Energy Aspects”
OPEC+ has simply made the Fed’s job more difficult.
- Voluntary production moves are easier to agree on and unwind without tainting domestic or external OPEC+ politics. Such cuts have previously been accepted by the group if they aligned with the spirit of existing OPEC+ policies — but they have typically expressed the initiative of a single country, with the exception of temporary Saudi-Kuwaiti-UAE reductions organised during the Covid-19 pandemic.
- A coordinated gesture on the scale of Sunday effectively creates a second, unofficial agreement on top of the existing formal OPEC+ strategy — one that lacks formal commitments and is easier to defend when individual oil ministries face pressure from their own governments or state oil companies to increase output and short-term revenue. Independent cuts also avoid the need for OPEC+ members to agree unanimously and, at the very least, avoid external accusations of organised anti-consumer behaviour.
- However, the gesture will not bridge the growing political chasm between OPEC+ kingpin Saudi Arabia and the Biden administration, whose influence in the Middle East has been increasingly supplanted by China. In the last month, Beijing has mediated the resumption of relations between archrivals Tehran and Riyadh, with Saudi Arabia also taking steps to become a dialogue partner in the China-led Shanghai Cooperation Organization.
- OPEC+ has simply made the Fed’s job more difficult.”[The organised voluntary cuts] would undoubtedly contribute to the narrative that the US is losing its regional influence to… influence the actions of core OPEC producers like Saudi Arabia.” “Historically, Saudi Arabia and the UAE have been US client states,” S&P Global Platts’ EMEA head of news Andy Critchlow told CNBC.
- “This cannot be viewed in isolation from the broader geopolitical situation in the Middle East, where these core oil producers are shifting much closer to China and Russia.” They would rather operate in a multipolar world than rely solely on the United States.”