|
Below is a complimentary client research note issued earlier this morning from Energy Policy analyst Joe McMonigle. If you are an institutional investor interested in accessing our research email sales@hedgeye.com |
Takeaway: We’re Still Bullish on Cut Extension. Monitoring Compliance After One Month in New Deal Always Difficult.
On Monday OPEC+ members were putting out the word that the group was focused on extending the current 9.7 million barrels per day (b/d) in cuts and would have its video meeting one week earlier on June 4.
However, the Thursday meeting is still not confirmed amid compliance issues after just one month under the new deal and with one member (Iraq) off its committed cuts by about 500,000 b/d according to estimates. In an unusual tweet this week, the new Iraq oil minister pledged continued support and compliance to the new cut deal.
Some news reports today are suggesting there may not even be a June 9/10 meeting if the compliance issue is not resolved – in which case the cuts would automatically be reduced to 7.7 million b/d for the rest of the year.
We are skeptical about this and still think an earlier meeting is possible since member NOC’s want to release official selling prices (OSPs) for July asap.
Saudi Arabia and Russia are exerting maximum pressure on Iraq and warning other potential laggards that compliance under the new deal is required. But in reality, all they can get from these countries are commitments.
With every OPEC meeting there are mixed messages and a surprise or two, but we are still bullish on an extension of the 9.7 million b/d cuts for at least another month or two.
We don’t see OPEC+ letting go of oil market momentum after just one month under the deal.
