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OPEC Remains Upbeat About Oil Demand

OPEC Remains Upbeat About Oil Demand

OPEC remains optimistic that the…

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Analysts Reiterate Calls For $100 Oil As Saudi Arabia Cuts Production

Brent prices could hit $100 by the end of this year as the new 1 million bpd production cut Saudi Arabia announced on Sunday would further tighten the oil market, analysts said after the OPEC+ meeting this weekend.

The OPEC+ producers decided to keep the current cuts until the end of 2024, while OPEC’s top producer and the world’s largest crude oil exporter, Saudi Arabia, said it would voluntarily reduce its production by 1 million bpd in July, to around 9 million bpd. The Saudi cut could be extended beyond July, Saudi Energy Minister Prince Abdulaziz said on Sunday, describing the announced reduction as a “Saudi lollipop.”

“With Saudi Arabia protecting oil prices from sliding too low by cutting production, we think oil markets are now more prone to a shortfall later this year,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note carried by Reuters.  

Even if China’s oil demand is not as strong in the second half of this year as expected, Brent Crude futures are set to rise to $85 per barrel by the fourth quarter of 2023, Dhar added.

Early on Monday in Europe, Brent Crude traded at $77 per barrel, up by 1% on the day.

ANZ analysts Daniel Hynes and Soni Kumari reiterated their $100 per barrel Brent target for the end of the year, saying that “Investors are likely to add bullish bets, comfortable that Saudi Arabia and OPEC will provide a backstop should the market hit any hurdles.”

“The oil market now looks like it will be even tighter in the second half of the year,” ANZ noted.

Goldman Sachs, which sees Brent at $95 per barrel in December, described OPEC+’s meeting as “moderately bullish” to its forecast and offsetting some bearish downside risks such as higher supply from sanctioned Russia, Iran, and Venezuela and weaker-than-thought Chinese demand.   

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By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on June 05 2023 said:
    In normal circumstances such a cut would push Brent crude to $90 a barrel this year and even 100.

    However, the current circumstances in the market won’t allow the Saudi cut to achieve this level. The reason is that the decline in oil prices over the last three months has nothing to do with the fundamentals of the market which remain robust and everything to do with persistent fears of a banking or financial crisis triggered by a shaky US banking system.

    Pressure on prices will continue until these fears subside or disappear altogether. Only then will prices recover all their previous losses and resume their surge with Brent crude hitting $90 and even touching $100.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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