OPEC+ cut could push oil to $100 a barrel – 4/3/2023 – Market

Surprising additional production cuts by the OPEC+ group (Organization of the Petroleum Exporting Countries and its allies) could push oil prices to $100 (R$508) a barrel, squeeze the market and refinery margins, analysts and operators.

Oil prices jumped more than US$ 5 (R$ 25) a barrel this Monday (3), after OPEC+, including Russia, announced new production cuts of around 1.16 million bpd (barrels). per day) from May through the rest of the year.

The pledges will take the group’s total volume of cuts since November to 3.66 million bpd, according to Reuters calculations, equivalent to 3.7% of global demand.

OPEC+ was expected to keep output steady this year, having already cut two million bpd in November 2022.

Rystad Energy said it believes the cuts will tighten the oil market and push prices above $100 a barrel for the rest of the year, possibly taking Brent as high as $110.

UBS also expects Brent to hit $100 by June, while Goldman Sachs raised its December forecast by $5 to $95 (482).

Goldman said SPR (strategic oil reserves) releases in the United States and France due to ongoing strikes, as well as Washington’s refusal to replenish its SPR in fiscal 2023, may have prompted OPEC+ action. .

An official at a South Korean refinery said the cut was “bad news” for oil buyers and that OPEC was trying to protect its profits against concerns of a global economic slowdown.

Cutting supply would boost prices in the same way that weakening economies depress fuel demand and prices, squeezing refineries’ profits, the South Korean refining official and a Chinese trader said.

Both declined to be identified as they were not authorized to speak to the media.

Saudi Arabia said its voluntary cut in production was a precautionary measure aimed at supporting market stability.