OPEC+ really is a group of rascals — way to ruin a perfectly good Sunday with some nuclear news for the energy guys. A voluntary production cut of this size, certainly shifts the oil market’s paradigm back into the cartel’s favour.
There has been a lot of discussion about this decision — rightfully so — the bears have touted this as a reflexive move in response to prevailing demand weakness, and perhaps an underperforming China (surely OPEC would know things that we don’t), while the bulls have revelled in the fact that fewer barrels means a tighter market; and we know what happens to prices in tighter markets. While these voluntary cuts total ~1.7mb/d, Russia will be “extending their previously announced 500kb/d of cuts through the end of the year”, suggesting 1.2mb/d of incremental production cuts.
Adding these cuts back to Energy Intelligence’s assessed spare-capacity figures (link here), the group now has a possible 5-7mb/d of production capacity to game the market — an incredibly …