MNI Commodity Weekly - Surprise OPEC+ Cuts Send Oil Markets Higher Denting US-Saudi Relations

Executive Summary:

OPEC+ Unexpectedly Announced a Voluntary Output Cut Until End-2023: The announcement Sunday ahead of the group’s JMMC meeting Monday sent crude benchmarks skyrocketing, as market participants had anticipated the group to maintain current output quotas. The voluntary nature of the cuts makes them easily reversible, but it regardless sent Brent crude prices soaring by as much as 8.4% Monday. Given member states plan to comply with the cuts, the global crude balance is likely to show a significant deficit in the second half of this year.

OPEC+ Cuts Undermine US on World Stage: The OPEC+ cuts are seen as another snub to the Biden administration as it aims to encourage Gulf producers to raise production as it tries to win its domestic inflation battle. It now also throws doubts about the Fed’s ability to unwind rate hikes that are weighing on American consumers and could derail Biden’s attempt at a second term next year.

Oil Markets: Crude holding within a range following a price surge higher in response to the OPEC production cut announcement on Sunday. Oil product margins remain soft on weak demand concerns and returning refinery operations.

Gas Markets: European gas markets continue to fluctuate on changes in the weather forecast with supplies holding steady and storage ending the withdrawal season above the previous five-year range. US Natgas remains weak with strong supplies and despite higher LNG exports.

Full piece here:

MNI Commodity Weekly - Surprise OPEC+ Cuts Send Oil Markets Higher Denting US-Saudi Relations.pdf