[PRIMER] OPEC+ JMMC on Friday 4th August at 13:00 BST/08:00 EDT

Analysis details (13:56)

OVERVIEW:

• The Joint Ministerial Monitoring Committee (JMMC) is set to meet at 13:00 BST/06:00 EDT to discuss current oil market conditions and the outlook.


• The meeting itself is expected to be a non-event, with markets expecting the current pact – which does not include voluntary cuts – to be rolled over.


• However, attention will be on what Saudi Arabia will opt to do with its 1mln BPD unilateral and voluntary cut.


• Sources have suggested that OPEC+ is unlikely to tweak its current output policy (ex-voluntary cuts) on Friday, according to multiple OPEC sources cited by Reuters. The decision to leave policy unchanged stems from the recent increase in oil prices.


• Traders cited by Bloomberg reportedly expect the measure to be prolonged amid the fragility of crude prices.

LATEST SOURCES

• Saudi Arabia will extend the voluntary cut of one million barrels per day for another month to include September that can be extended or extended and deepened - state news.

SAUDI ARABIA

• Saudi Arabia two months ago announced that it will voluntarily and unilaterally curb 1mln BPD of output through July in response to the weaker oil prices at the time.


• This was subsequently extended through August, with traders now focused on whether the Kingdom will opt to further extend these voluntary cuts through September.


• Some believe that the Saudis have scope to unwind some of these unilateral cuts, possibly bringing back between 250-500k BPD of shuttered production.

ANALYST VIEW:

• Analysts at Goldman Sachs say over the previous year, OPEC, with Saudi Arabia in particular, has significantly increased its spare capacity. As prices ascend, they are expected to incrementally boost production.


• GS analysis suggests that the spare capacity in core OPEC countries – namely Saudi Arabia, the UAE, and Kuwait – has surged by 2.5mln BPD from the near-record lows seen last fall.


• GS suggests that as prices for Brent crude move sustainably to the USD 80-100 OPEC sweet spot, OPEC output is likely to recover. “Beyond the direct revenue boost from higher volumes, OPEC also wants to avoid sharp rises/declines in shale supply/global demand from very elevated prices, as happened during the 2022 energy crisis.”


• Thus, GS continues to expect OPEC+ to reverse half of its May 2023 1.1mln BPD cut from January 2024, and to maintain the November 2022 cuts.

03 Aug 2023 - 13:56- EnergyImportant- Source: Newsquawk