Oil prices are expected to reach $100 a barrel next year, following the production cut by the largest oil producer group, OPEC+.
OPEC and its allies agreed on Thursday to extend output cuts into early next year but at a lower rate. The voluntarily cut by Saudi Arabia, Russia and some new participants is said to approach two million bpd after the latest agreement. The deal was said to be fulfilling Riyadh’s goal for this meeting to further tighten global supply for what it calls “stabilization” of oil prices.
The group produces around 43 million bpd, which already reflects a 5-million-bpd cut of which 3.66 million bpd are from the group, while Saudi Arabia volunteered for an additional 1 million bpd cut, along with Russia for around 400,000 bpd of production cut.
According to several sources, the new voluntarily cut by the group is approaching 2 million bpd as Riyadh extended its supply cut further. Russia will up its tightening to 500,000 bpd and other allies will also contribute as well.
UBS strategist Giovanni Staunovo wrote in a note after the announcement by OPEC+, stating that he expects supply to increase gradually when the cut expires at the end of the first quarter of next year, which should help keep the oil market in deficit in the first half. He also added that he expects oil prices to rise in the undersupplied oil market.
Meanwhile, Goldman Sachs expected to see oil prices in the $80-$100 range in 2024 with OPEC+ maintaining the price.
ANZ’s analyst expected Brent crude prices to recover in the next 12 months following supply cuts by Saudi Arabia and Russia with its target of end-December quarter at $90 a barrel, stating that the demand side is not a major factor to swing the market.
In addition, Brazil will join the OPEC+ coalition early next year, but will not contribute to the group’s commitment on supply cuts.
