...

Saudi Arabia will be able to reverse its1 mbd cut in April

Oil&Gas Materials 18 January 2021 13:32 (UTC +04:00)
Saudi Arabia will be able to reverse its1 mbd cut in April

BAKU, Azerbaijan, Jan.18

By Leman Zeynalova – Trend:

Saudi Arabia will be able to reverse its1 mbd cut in April, Trend reports citing the US JP Morgan Bank.

“Saudi Arabia has yet again demonstrated clear determination to support short-term markets through an additional and unilateral 1 mbd cut as a “new year’s gift”. In December we felt that a flat demand profile in 1Q21 and significantly faster-than-expected recovery in Libyan production suggests that the additional supply from OPEC+ may not be needed just yet. However, rapidly rising benchmark oil prices on the back of vaccine announcements prompted the alliance to agree to bring 500 kbd of production back to the market in January—a decision that had to be more than offset by Saudi Arabia’s cut barely a month later.

Officially, the OPEC+ group agreed to make no changes to its January production schedule (+500 kbd) and add 75 kbd in both February and March, bringing the corresponding cut levels from 7.2 mbd in January to 7.12 mbd in February and 7.05 mbd in March. The increases in production will be allocated only to Russia (65 kbd) and Kazakhstan (10 kbd), which lobbied that strong domestic winter heating and driving demand should offset those increases,” reads the report.

Incorporating Saudi’s 1 mbd voluntary cut in February and March, this essentially means that OPEC+’s production will average around 34 mbd in those months, said the Bank.

“Production quotas beyond March will be evaluated at OPEC+'s monthly meetings (OPEC+ to hold next JMMC on February 3, next full meeting on March 4). If demand develops in line with our expectations, our analysis indicates that Saudi Arabia will be able to reverse its 1 mbd cut in April, with the rest of the alliance adding another 500 kbd to the market. We believe demand conditions will allow the group to easily ramp up production by another 1 mbd in May, while keeping the market in deficit—a necessary condition to continue to draw down stockpiles. This essentially means that about 5.5mbd of production will remain out of the market for the entirety of 2H21.”

---

Follow the author on Twitter: @Lyaman_Zeyn

Tags:
Latest

Latest