Oil Surges in Early Trading After OPEC+ Surprise ‘Unipolar World’-Challenging Production Cut

As one would have expected, oil prices are surging at the futures open with WTI up over 7% near $82 – its highest since late Jan…

Additionally, less than two weeks after slashing its 2024 Brent price target from $100 to $94, Goldman done a full 180, and late on Friday raised its 2024 Brent forecast back to $100, and 2023 oil price target to $95 (from $90, and from $95 previously).

“Nine members of OPEC+ announced today a surprise “voluntary” collective output cut totalling 1,66mn b/d which will take effect from May till the end of 2023.

As we have argued, OPEC+ has very significant pricing power relative to the past, and today’s surprise cut is consistent with their new doctrine to act pre-emptively because they can without significant losses in market share.

As we already assumed that Russia cuts would extend into 2023H2, we are lowering our OPEC+ production end-2023 forecast by 1.1 mb/d. Incorporating this significantly lower OPEC+ supply, slightly lower demand, and the modest French SPR release, we have nudged up our Brent forecasts by $5/bbl to $95/bbl (vs. 90 previously) for December 2023, and to $100 (vs. 97) for December 2024.”

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