KUALA LUMPUR, April 4 — The 1.66 million barrels per day (bpd) ‘voluntary’ output cut by the Organisation of Petroleum Exporting Countries and its allies (Opec+) was a positive surprise, as the market was expecting the output to remain status quo, said Maybank Investment Bank Bhd (Maybank IB).
In a note today, Maybank IB said that OPEC+ has continued to play its role as a formidable swing producer and remains a very much disciplined pact, collectively.
“We are keeping our oil price forecast unchanged at US$100 a barrel (bbl) (RM440) (dated Brent crude) for 2023, with an upside bias.
“Oil price could sustain above US$100 per bbl should the OPEC+ alliance take a stand to see an elevated oil price policy over higher output.
“This would further tighten the global supply market, which is already being affected by the prolonged structural under-investment and rising demand outlook,” it said.
On April 3, the Opec+ alliance collectively decided to voluntarily cut crude oil production by up to 1.66 million bpd, effective May-December 2023.
Russia and Saudi Arabia will take the lead on the cut, pledging to reduce their output by 500,000 bpd each, followed by Iraq (211,000 bpd), the United Arab Emirates (144,000 bpd), Kuwait (128,000 bpd), Kazakhstan (78,000 bpd) Algeria (48,000 bpd), Oman (40,000 bpd) and Gabon (8,000 bpd) respectively.
Maybank IB said the 1.66 million bpd cut represents about two per cent of the world’s market supply—the planned production cut will undoubtedly tighten the global supply-demand balance, removing a short-term supply overhang and raising the oil price’s floor price to US$80 per bbl.
“This move reiterates our view that the Opec+ alliance remains very much a relevant ‘swing oil producer’, still disciplined and strong as a collective force in shaping the direction of the oil market (production and oil price) while gradually pivoting away from the United States’ influence/ direction,” it said.
The research house said the cut makes sense too, for the sector is facing the challenge of raising production following years of under-investment since 2014. — Bernama
