Researchers at UOB Group assessed the recent OPEC meeting and the prospects for the barrel of the European reference for the crude oil.
Key Quotes
“Across the weekend, the OPEC led group announced the enforcement of overall production compliance of 100%. Given the current over compliance to the production cut initiative, this would imply a production increase of about 1 mbpd”.
“This implied production increase of 1 mio bpd was larger than expected. Given Iran’s very vocal resistance to the initiative, some industry forecasts had anticipated a production increase of 0.5 to 0.7 mbpd. As such, Brent crude oil started trading this week with an early pullback from USD 75 / bbl to USD 73.90 / bbl”.
“Overall, this move was well telegraphed in advance by Saudi Arabia and reinforces our current neutral range trading outlook for Brent crude oil. We reiterate our forecast of USD 70 to 80 / bbl going forward for the next four quarters”.
“Because OPEC no longer specifies individual country production quotas, this may lead to difficulties in enforcement and possibly more volatility in crude oil prices going forward”.
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