BAKU, Azerbaijan, Jan.11
By Leman Zeynalova – Trend:
Over the medium-term OPEC is expected to continue prioritizing revenue over market share, Trend reports citing the US JP Morgan Bank.
“At the latest OPEC+ JMMC meeting, Saudi Arabia announced an additional 1mb/d output cut in February and March.The reduction more than offsets a combined 75kb/d increase which Russia and Kazakhstan will be allowed to make in each of the months. Short-term supply cut demonstrates that Saudi is willing to cut deeper if demand is at risk, and ensures a sustained OECD inventory drawdown also capable of absorbing increased supply from Libya/Iran. Over the medium-term OPEC is expected to continue prioritizing revenue over market share until both inventories fall in line with historical averages, and domestic economic growth improves,” the Bank said in its latest report.
With these primary objectives in mind, Saudi’s decision is seen as a preemptive measure designed to ensure drawdowns continue to occur, JP Morgan believes.
OPEC+ agreed to lift oil production by 75,000 barrels per day over January levels.
But Saudi Arabia’s late announcement after the meeting sent oil prices soaring—that Saudi Arabia would voluntarily cut an additional 1 million barrels per day in February and March above its current quota—all while OPEC’s allies get to ramp up production.
The OPEC+ agreed not only for the production levels for February but for March as well. March’s production level will see an additional increase of 120,000 barrels per day over February levels, or 195,000 bpd over January levels.
With March’s production quotas already set, the February meeting, therefore, will set production quotas for April. The previous meeting held in December adjusted the total production cuts to 7.2 million bpd for January, from 7.7 million bpd before.
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