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The pledge by Saudi Arabia to voluntarily cut output by 1mb/d has drastically changed the dynamics within the OPEC+ alliance. Economists at ANZ Bank forecast Brent Crude Oil to trade around $58 over the next quarter and to reach the $60 level in the second half of the year.

Key quotes

“The move by Saudi Arabia to cut output by 1mb/d has stabilised the oil market amid rising risks of ongoing weakness in demand. Air traffic remains subdued, while demand for road transportation fuel is falling again.” 

“We have left our assumptions for demand unchanged. This should see the drawdown on global inventories rise to 1.1mb/d in Q1. As a consequence, we have raised our 0-3 month target to $58/bbl. But we also see further downside risks to demand in the short-term. This is likely to keep any further upside to prices limited over the next few months.”

“Saudi Arabia’s surprise announcement has drastically changed the dynamics within the OPEC+ alliance. The group is likely to rely even more on Saudi Arabia to do the heavy lifting on supply cuts. This could become an issue come March, when the alliance looks at whether it should let the supply agreement expire as planned.”

“We expect global crude oil demand to increase by 4-5mb/d in H2 2021. While OPEC is expected to meet a large portion of this, -will be required to balance the market. We now expect Brent crude to hit$60/bbl in H2 2021 before stabilising at those levels. WTI crude should follow a similar path.”