OPEC+ wants higher oil prices.

Saudi Arabia will make a further voluntary oil production cut while others -- including Russia -- will continue with voluntary cuts through 2024, rather than the current plan to reevaluate at the end of 2023.

Starting in July, Saudi Arabia will cut production by 1 million barrels per day. That's currently just for one month, but Saudis energy minister said it could be extended (likely based on where prices are).

For other OPEC members, baselines have been be adjusted for 2024 and that means lower ceilings for Angola and Nigeria. However it should be noted that neither Angola, nor Nigeria is currently producing anywhere near quotas.

The next OPEC meeting was set for November 26 but the group always maintains flexibility to call new meetings.

The output target for 2024 is 40.46 but note that the UAE's baseline was moved up by 200k bpd. So while I believe their voluntary cuts still apply, they will be able to pump from a higher baseline.

OPEC quotas

Overall, 2024 targets are now about 1.4 mbpd lower than current.

Many in the market already see crude balances tightening significantly in H2 as driving season picks up, aviation demand improves and Asian economies grow.

Few in the market expected OPEC to make any move, though there were some murmurs late last week. WTI crude closed Friday at $71.74 and Brent at $76.13. How much further it rises will depend on how much production Saudi Arabia curbs for 2023.

However the extension of cuts through 2024 is also materially bullish further out, though there will be some that doubt OPEC discipline. But those doubts probably only matter at prices above $90, when there's a large incentive to break ranks.

Here were May production levels:

OPEC table

Bottom line here:

  • 2023 global production lowered by 1 mbpd in July via Saudis for one month (maybe more)
  • OPEC+ voluntary cuts extend through all of 2024

Overall, this is undoubtedly bullish for oil but after the last big surprise oil jumped to $84 and then slowly gave it back.

Oil  daily WTI
Oil daily WTI

I expect that we will go above $75 at the open.