The OPEC meeting came and went without much of a hitch. But while market analysts and the media had assumed that a rollover of the current level of production cuts was in the bag, OPEC surprised us all again.
Saudi Arabia had hinted prior to the meeting that the cartel was likely to roll over the cuts when it pushed for a rethink of its oil demand projections for the rest of the year, which it thought was too high. It also urged “caution” in this fickle market. This suggested that Saudi Arabia believed oil demand was not as high as they had anticipated, and therefore, there may not be enough room for members to increase production.
But that proved not to be the case. In light of global pressure on the group - both from the United States and India - to supply more crude oil to the market, the result perhaps isn’t all that surprising. Saudi Arabia denied that the pre-meeting phone call with Washington had anything to do with the meeting’s outcome, but we believe the media is discrediting the amount of influence this interaction had. To this end, Saudi Arabia raised no objections to a gradual production increase during the OPEC meeting and pointed out that domestic demand would rise over the summer months and that a production increase may be necessary.
OPEC’s meeting was quick on Thursday. Saudi Arabia started the meeting with a thinly-veiled threat that it would decide on the fate of its own voluntary production…