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OPEC+ Cut Supports UBS Price Target

OIL

Further OPEC+ cuts driven by Saudi commitments are positive for crude price direction according to UBS in a research note and at the very least provides support to the downside.

  • The most significant update from the meeting according to UBS was Saudi Arabia agreeing to make a 1mmbpd voluntary cut starting in July followed by the UAE seeing its quota move 0.2mmbpd higher next year.
  • Without other changes to the UBS global supply/demand model - balances could now go 2.3mmbpd undersupplied in 2H23 and remain 0.5-1.0mmbpd in 2024 vs. its current outlook to be in a 0.2mmbpd surplus.
  • OPEC news is positive for crude oil direction and reiterates the banks 2024 $85/$81 Brent/WTI deck.
  • A market that is >1.5mmbpd undersupplied could see prices head higher, but further upside may be limited as an uncertain demand outlook continues to weigh on price UBS said in the research note.
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