Banks See Saudi Arabia’s Output Cut Decision As Bullish Short-Term Signal

Banks are seeing Saudi Arabia’s decision to deepen its output cuts for July at the 35^th JMMC OPEC meeting as a somewhat bullish market signal for the short term.

• Goldman Sachs said in a note the OPEC+ meeting was moderately bullish and offset some bearish downside risk to the its December forecast of $95/bbl and its April forecast of $100/bbl. This extra cut is forecast to support Brent prices by $1-6/bbl, depending on the duration.
• The bank sees the extension of the voluntarily cuts until the end of 2024 as a “somewhat” bullish sign as the duration of the cuts will also depend on price levels.
• Morgan Stanley shares the view that the Saudi output cut may support prices in the short term, while market dynamics for 2023 and 2024 remain unchanged.
• Commonwealth Bank of Australia anticipates Saudi Arabia to extend its July production cuts if Brent prices remain between $70-75/bbl. There is a possibility for the country to further deepen cuts if Brent prices drop below $70/bbl.
• ANZ noted the extension of the voluntary cuts provides some stability over the medium term. The bank maintains its year-end crude target of $100/bbl.