Crude oil prices continued on their rollercoaster ride following last week’s announcement that OPEC will be gradually increasing output in coming months. Strategists at ANZ expect the impact of this increase in quotas to be minimal on supply in the second quarter or any month thereafter and forecast Brent Oil breaking above the $70 level.
OPEC starts normalisation process back to full capacity
“In the end, OPEC+ agreed to increase quotas by more than 1.1mb/d from May-July in three equal monthly instalments. Over the same period, Saudi Arabia will wind back its additional 1 million b/d cut below its official quota.”
“The higher-than-expected increase in quotas in May will be offset by the more gradual rise in Saudi Arabian output. Overall, that has seen us raise our estimate of supply by only 400kb/d in Q2 2021. Even with the additional supply, we still expect further drawdowns in global inventories. This is likely to induce more OPEC supply back into the market in H2 2021. These bullish balances with sequential draws in the second and third quarters will firm up prices.”
“A more positive macro backdrop is also likely to attract further investor interest in the sector.”
“We maintain our positive view on prices in the short term, with Brent crude breaking through $70/bbl to hit fresh highs of $75/bbl in Q3.”
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