OPEC+ is in a superb place to maintain oil at round $85 per barrel, in accordance with a brand new report from Skandinaviska Enskilda Banken AB (SEB), which was despatched to Rigzone earlier this week.
“We count on OPEC+ to be in stable management of the worldwide oil market over the following couple of years as U.S. shale oil manufacturing slows to a trickle,” SEB analysts Bjarne Schieldrop, the corporate’s Chief Commodities Analyst, and Ole R. Hvalbye, famous within the report.
“An oil value of $85-90 per barrel must be a superb balancing level for shoppers and producers,” the analysts added.
Within the report, the analysts said that OECD industrial oil inventories are up 111 million barrels over the previous yr however added that U.S. strategic petroleum reserves over the identical interval have declined “by virtually the identical quantity – 95 million barrels”.
“The worldwide oil market has thus been almost balanced over the previous yr with no actual improve in OECD inventories when the decline in U.S. SPR is taken into account,” the analysts stated within the report.
The analysts additionally highlighted within the report that Saudi Arabia produced 10.5 million barrels per day in April “however then quickly drew it all the way down to solely 9.0 million barrels per day in July to September”.
“This did wonders for the oil value, which has shot again as much as round $85 per barrel,” the analysts said within the report.
“This [is] precisely the place we predict Saudi Arabia needs to maintain it if it might. It yields enough revenue whereas it isn’t so excessive that it stirs an excessive amount of political kickback from its clients,” they added.
“The present deep cuts by Saudi Arabia – during which Russia will take part with a 0.3 million barrel per day minimize in September – are in all probability manner too deep if the IEA is appropriate in its calculations. It estimates that the necessity for oil from OPEC is 30 million barrels per day in Q3/23 and 29.8 million barrels per day in This autumn/23,” they continued.
The analysts famous within the report that Saudi Arabia would wish to provide nearer to 11 million barrels per day for OPEC to succeed in this stage and never the 9.0 million barrels per day it’s producing now.
“We predict Saudi Arabia will add provide in This autumn/23 to forestall the oil market overheating,” the analysts stated within the report.
The analysts additionally highlighted within the report that the IEA estimates that the world will want OPEC to provide 29 million barrels per day in 2024.
“That’s down 0.3 million barrels per day from 2023 as non-OPEC provide is projected to develop sooner than world demand,” the analysts stated.
“If the non-Saudi producers inside OPEC produce the identical in 2024 as they up to now have carried out in 2023, then the necessity for oil from Saudi Arabia in 2024 might be 10.3 million barrels per day. That’s greater than what it appears like Saudi Arabia will produce this yr and greater than its common manufacturing throughout 2015-19 of 10.1 million barrels per day,” they added.
“So Saudi Arabia appears set to be completely nice in 2024 with good management of the market with means to each carry and scale back manufacturing and preserve the oil value simply the place it needs it to be. And with Saudi manufacturing now under Russia’s, it gained’t need to do all of the heavy lifting itself,” the analysts went on to state.
If “painful cuts” are wanted in 2024, then Russia will take part with deliberate cuts, in accordance with the analysts.
The SEB analysts famous within the report that U.S. shale oil manufacturing has been steadily cooling since early December “with drilling rig depend falling even at a WTI value of $80 per barrel”.
“This transformation in habits has handed a whole lot of market energy again to OPEC that it and Saudi Arabia are at present exercising and can proceed to train within the coming years,” the analysts stated within the report.
“The largest danger to Saudi Arabia’s management of the scenario would in all probability be a sudden revival of misplaced manufacturing by OPEC laggards like Venezuela, Iran, Nigeria, Angola, and Libya,” they added.
The entire U.S. rig depend at present stands at 631, in accordance with Baker Hughes’ newest rotary rig depend, which was launched on September 1. This depend is down 129 rigs yr on yr, the depend confirmed, highlighting that the U.S. has minimize 84 oil rigs and 48 fuel rigs, and added three miscellaneous rigs, in comparison with this time final yr.
In its newest brief time period power outlook (STEO), which was launched final month, the U.S. Vitality Data Administration (EIA) projected that U.S. crude oil provide would are available in at 12.76 million barrels per day this yr and 13.09 million barrels per day in 2024.
Manufacturing from the Decrease 48 states, excluding the Gulf of Mexico (GOM) was projected within the STEO to be 10.52 million barrels per day in 2023 and 10.81 million barrels per day in 2024.
Brent rose from a detailed of $72.26 per barrel on June 27 to a detailed of $87.55 per barrel on August 9, earlier than dropping to a detailed of $83.36 per barrel on August 24. The commodity rose to shut at $90.04 per barrel on September 5. On the time of writing, the value of Brent crude oil is buying and selling at $89.28 per barrel.
The EIA initiatives in its August STEO that the Brent spot value will common $82.62 per barrel this yr and $86.48 per barrel subsequent yr. In a report despatched to Rigzone final week, Customary Chartered predicted that the ICE Brent value would common $91 per barrel this yr and $98 per barrel subsequent yr.
In a separate report posted on SEB’s web site on August 29, Schieldrop famous that SEB’s view is that Saudi Arabia is not going to danger driving crude oil costs to $100-110 per barrel or increased by means of deliberate cuts “as this can result in elevated political storm from the U.S. and possibly additionally from China”.
“We predict that Saudi Arabia is completely pleased with the present oil value of $85 per barrel and need to preserve it at that stage. Getting it precisely proper is after all tough, however they do have the capability to at the very least get it ballpark proper,” he added in that report.
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