BAKU, Azerbaijan, October 10. Russia risks becoming a lame duck in OPEC+, Trend reports with reference to Fitch Solutions.
The company analysts were commenting on the latest OPEC+ decision to cut the oil production by 2 million barrels per day.
“The cut also sends a signal to other market participants, that the group will continue to intervene to put a floor under oil prices next year, amid a deteriorating macroeconomic backdrop. Currently, bearish macro sentiment, rising recession fears and broader concerns of a slowdown in oil demand growth are being pitted against a comparatively bullish picture on the supply side,” Fitch Solutions said in a report.
The company analysts note that announcement by OPEC+ helps to tip the balance in the favour of the latter, given that it points to lower production in 2023 and is a sign of continuing cohesion amongst the group.
“OPEC+ policymaking over the past two years has consistently prioritized prices over production and, with government spending plans among key members heavily reliant on continued high revenues, there is little reason to expect any change in the group’s strategy. The question is, how effective the strategy will be. On the one hand, constraints on US shale production and continued underinvestment in the global upstream sector give OPEC+ greater sway over the oil market. On the other, the demand-side outlook continues to darken, while Russia risks becoming a lame duck, as its output falls further below its OPEC+ quota,” reads the report.
Fitch Solutions believes that Brent’s breakout from its multi-month downtrend is a positive sign for the group and, from a fundamental perspective, there are reasons for optimism.
“However, oil market sentiment remains fragile and, should prices relapse below USD90/bbl after such a sizeable cut, the group’s credibility could be damaged. Any loss of faith in the OPEC+ ‘put’ would be extremely bearish for prices and poses a downside risk to our current forecast for Brent crude to average USD100/bbl next year.”
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