OPEC+ announced a production cut of two million barrels per day at its meeting this week – the largest such cuts from the group since the start of the Coronavirus in early 2020. What’s unprecedented is that the group decided to take barrels off global markets amid one of the tightest oil markets on record and ahead of a potential decline in Russian exports later this year.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA) believes that the group’s headline cut will result in a lower effective cut of the quantum of ~1.1m b/d due to adjustments to baseline levels of production allocated to producers. Critically, he views that the cuts will not only further tighten fundamentals – lending support to his bullish price forecasts – but also help remedy the large exodus of oil investors that has left prices underperforming both fundamentals and other cyclical asset classes.
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