Bankinter: Saudi Arabia prepares to increase oil production. Thus abandoning its objective of placing Brent at ~$100/barr. An increase in production means taking a decision that is the opposite of the measures that OPEC+ was applying. For reference, it is currently cutting 5.86M barrels of oil per day (bpd), which corresponds to around 5.7% of world oil demand. Within the aforementioned cuts, 3.66M bpd will be extended until the end of 2025 and the remaining 2.2M bpd will be extended until December 2024.
Analysis team’s view: Bad news for oil. In the last two sessions the Brent price has fallen ~5% to stand at $71.49/barr. Saudi Arabia needs a price of ~$100/barr. to maintain stability in its trade balance (IMF). The increase in production would be implemented with the idea of capturing (or not losing) market share, which would put further downward pressure on the price of oil. Moreover, in early September OPEC+ revised global oil demand for 2024 and 2025 downwards. Therefore, lower oil prices mean less pressure on the inflation side, especially in Europe, which makes the ECB’s job easier.
