This is a bolt of lightning out of the blue for the oil bulls .
Saudi Arabia announced a voluntary 500k bpd oil production curb through year end and that was followed by several other gulf states joining in:
- Iraq to cut by 211k bpd
- Kuwait to cut by 128K bpd
- Oman to cut by 40k bpd
- UAE to cut by 144k bpd
Add it all up and that's 1,023,000 barrels per day, or about 1% of global oil output.
That's a massive swing in a physical market that already looked like it would tighten substantially into the summer. The move shows the vulnerability of the US after unloading about 1 million barrels per day for six months last year (and into this year).
What's especially notable is that this announcement goes through year end. It's also a slap in the face to reports that the UAE was thinking of ditching OPEC as their participation is particularly notable.
Tomorrow is OPEC's JMMC meeting and we might see talk from them that the oil market is oversupplied and that action was needed. In any case, this is puts a bow on this month's oil bottom and I'd be surprised if we don't see $80 WTI on Monday.
Update: Add in Algeria for 48k bpd, Gabon for 80 kbpd and Kazakhstan for 78k bpd. Also keep in mind that early this year Russia announced 500k bpd through June but they've now extended that through year end. So all told, that's nearly 1.7 mbpd.
There's talk about a $10 rise in crude prices on this, though my unscientific poll has the market feeling less bullish.
I don't think anyone will get another chance to buy $80 any time soon. Meanwhile, the Biden administration is already barking, saying this move isn't advisable.
