🛢️ OPEC Cuts (Again)

Let the Wild Price Speculation Begin in 3, 2, 1…

Good morning; here's what the Oilman has for you today:

  • OPEC Cuts (Again). Let the Wild Price Speculation Begin in 3, 2, 1…

  • What Recession? U.S. Oil, Gas Output on the Rise

  • Tweet of the Day

OPEC Cuts (Again). Let the Wild Price Speculation Begin in 3, 2, 1…

Saudi Arabia will cut oil production by another 1 million bpd from next month, deepening the total OPEC+ cuts by about 800,000 bpd.

Analysts are once again predicting oil could hit $100 per barrel by the end of the year.

“A Saudi lollipop” for short sellers

The latest OPEC+ meeting didn’t exactly deliver any surprises. Everyone expected cuts. It’s the how of these cuts that was a bit of a surprise.

  • Most OPEC+ members will keep pumping at current levels.

  • The UAE will be allowed to raise output by 200,000 bpd.

The Saudi energy minister called the kingdom’s cuts “a Saudi lollipop” for the rest of OPEC+.

The important bit is that current cuts are being extended by the end of the year.

And there’s another 1.4 million bpd in cuts coming from 2024.

These guys just can’t stop cutting, can they?

They seem to really need higher prices…

And they might get them because as supply shrinks, demand remains stable.

$100 per barrel of Brent by end-2023

Analysts sprang at the opportunity to speculate some more on oil prices.

Goldman is modest, seeing oil rising by just $6 per barrel, while ANZ expects Brent to hit $100 by the end of the year.

Short sellers are not buying it—literally and figuratively—yet.

And they might not buy it at all if signs of recession continue popping up.

U.S. manufacturing activity has been down for seven months running.

China’s has been shrinking, too, though, for just two months.

Maybe one lollipop won’t do the trick.

What Recession? U.S. Oil, Gas Output on the Rise

Despite signs of a slowdown in certain parts of the U.S. economy, oil and gas production swelled by 10% over the first quarter.

A decline may be in the cards for later this year, however.

The price-production gap

Per EIA figures, the U.S. added 182,000 bpd from the Lower 48 in January to March this year, while Alaska shed 11,000 bpd.

That’s a pretty good growth rate, but it will likely weaken going forward.

The thing is, there’s a delay between price movements and producers’ responses to them.

  • Basically, U.S. drillers were responding to high prices from last year in Q1 this year.

  • As prices fell this year, so will production. Rig counts are already down.

Who said oil at $100?

The beauty of industry cycles

Last June, exactly a year ago, WTI was trading at close to $120 per barrel.

Now, WTI is trading at barely above $70.

Something’s got to give. Meanwhile, drillers are laying down rigs.

But as soon as supply shrinks enough to push prices up, they’ll be back drilling again.

Oh the cyclical joys of this cyclical industry.

And for all the talk about slowdowns and recessions, we will keep seeing the cycles.

Because oil and gas are basically irreplaceable. Whatever the price, there will be demand.

Pretty cool for the industry.

Around the Global Patch

🌏 Coal-free Asia: climate alliance's guidelines.
🇨🇳 China's rebound reshapes emerging markets.
🇧🇷 Strohm supplies composite pipe for Brazil's permanent operations.

Tweet of the Day

Thanks for reading today's Oil Patch!

Stay oily, my friend.

Two quick requests before you go:

  • If you found this useful, forward this email to a friend to spread the word. 👇

  • Take 1 second to answer the poll below, and please tell us what you think 👇👇

What do you think of today's edition?

Login or Subscribe to participate in polls.

Interested in sponsoring The OilPatch?

Reply to this email to request our media kit and to learn more about sponsorship opportunities.