Saudi Output Cut To Create Substantial Market Tightness In 2H23: Unicredit

Saudi Arabia’s decision to cut production further, in addition to the 1.6mbpd voluntary cuts announced in April, will create substantial market tightness in the second half of this year, Unicredit said in a note.

• The expected market tightness during 2H risks pushing oil prices above what is optimal for OPEC+ members, endangering global demand and likely forcing the cartel to roll back some of the curbs either in late summer or in the fall.
• Unicredit believes OPEC is targeting Brent prices above $80/bbl.
• Starting in 3Q23, and assuming that global demand increases toward 103mbpd from the current 100.5mbpd, market conditions will flip, with the oil market likely experiencing a supply shortage of 2mbpd, the bank said.