BAKU, Azerbaijan, Jan.11
By Leman Zeynalova – Trend:
From April onwards, assuming demand continues to improve, the US JP Morgan Bank expects Saudi to resume production/capacity growth in an effort to pressure the back end of the curve and suppress non-OPEC future project IRRs, Trend reports with reference to the Bank.
“Saudi is expected to closely monitor non-OPEC volumes (in particular shale) and take a more dynamic role in short-term supply management in 2021 thus solving for a less predictable budgeting environment for US shale while equally ensuring the oil industry remains sufficiently capitalized to meet future demand growth (through spare capacity),” JP Morgan said in its latest report.
“While oil demand’s rebound led by new vaccines is likely to be ‘bumpy’ owing to varying degrees of penetration rates in EM, our oil strategists model global consumption almost back to pre-2019 levels in 1H22. OPEC will take a more active role in short-term supply management. While its primary focus will be to help drawdown global inventories, the Group should seek to deter incremental shale oil volume growth and long-cycle capex in non-OPEC/non-US. This path allows for an average 1.5mb/d deficit in global oil balances through 2021,” said the Bank.
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.
---
Follow the author on Twitter: @Lyaman_Zeyn