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The surprise OPEC+ cuts are making oil balances look “insanely bullish” for later this year, provided that the global economy holds up, Amrita Sen, founder and director of research at Energy Aspects, told CNBC on Monday.
On Sunday, OPEC+ members, led by Saudi Arabia and other major Middle Eastern producers, announced a fresh combined cut of 1.16 million bpd until the end of this year, on top of Russia's announcement that its own 500,000-bpd cut until June would be extended to the end of 2023, too.
Saudi Arabia will cut 500,000 bpd of its production starting in May and is joined by OPEC heavyweights Iraq, the United Arab Emirates (UAE), and Kuwait, plus OPEC’s Algeria and Gabon, and non-OPEC Oman and Kazakhstan.
Prices rallied on the news on Monday morning, and the U.S. benchmark WTI Crude bounced back to above $80 per barrel.
The latest cuts come on top of the 2 million bpd cut announced in October 2022 and running through the end of 2023.
All those cuts are expected to tighten the market further in the second half of the year. Tightening was already evident in some counter-seasonal drawdowns in March, Energy Aspects’ Sen told CNBC today.
“The pure oil market fundamentals are not bullish, but they are ok,” Sen added.
But as long as the economy is holding up – and that’s a big ‘if’ – and Energy Aspects already has a mild recession baked in, then “it is looking a very, very bullish second half of the year,” she noted.
Asked if we will see oil at $100 this year, Sen told CNBC “I absolutely think we will see a $100 oil, yes.”
Hours after OPEC+ announced the new cuts, Goldman raised its Brent Crude forecast to $95 from $90 at the end of the year. The bank also raised its Brent Crude forecast for 2024, now seeing it at $100 at the end of the year from an earlier projection of $97.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com