Oil: OPEC must manage expectations - Natixis

Abhishek Deshpande, Research Analyst at Natixis, explain that comments from the Saudi and Russian oil ministers, Khalid al-Falih and Alexander Novak from their joint meeting in Beijing on 15th May suggest that OPEC will decide to extend supply cuts into 2018 on May 25th.

Key Quotes

“Although current compliance is very strong at 110%, we expect compliance to wane somewhat in 2017H2 to between 80-90% as global oil demand increases due to increased refinery run rates in the summer months.”

“The US, driven by the prolific Permian basin continues to dominate non OPEC supply growth. The increasing rig count and the high DUC (drilled but uncompleted wells) backlog represent very real downside risk to a balanced market in 2017.”

“All agencies have raised their year-on-year supply growth estimates from April levels. IEA have raised their estimates by 110,000 b/d, OPEC by 360,000 b/d and EIA by 240,000 b/d. All agencies cite rising US production as the reason for their increased supply outlook. They have also revised their demand outlooks marginally, but with no major changes since the previous reports.”