Further Colour on Russia/Saudi Cuts

Further colour - The Saudi’s have extended their 1mn bpd production cut through September 30 as widely expected by the market, although the timing of which in relation to tomorrow’s JMMC meeting was unclear. Russia’s Novak added to that with a 300,000 bpd voluntary export cut for September.

• The move pretty much ensures inventories draw by around 2 million bpd for the next ~60 days from Saudi alone with strong market confidence of Saudi holding its word, especially with July vessel tracking indicating the majority of the cut has been met so far.
• The Russian cut should take 800,00 bpd of the market over the same timeframe though their benchmark they are cutting against is less clear.
• Riyadh says cuts serve "to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets"
• The Saudi headline elicited a sharp upward price response, indicating the move was not yet fully priced in or more likely running on the back of the words that the “cut can be extended, deepened”, leaving the possibility for Saudi to surpass its three-month voluntary commitment in 2021 markets thought the kingdom looked set to replicate. The Russian headlines failed to provide much further upside as yet.
• Note the pattern of Saudi announcing first, followed shortly after by Russia for next months announcements.
• Brent OCT 23 up 0.8% at 83.88$/bbl
• WTI SEP 23 up 0.9% at 80.23$/bbl