Julius Baer Research | Non-OPEC producers under the lead of Russia will join OPEC’s supply cuts, which was necessary for the deal to become effective. With the paperwork done, oil producers must now walk the talk. There are many buts and ifs and we remain sceptical if compliance with the quotas is sufficient to materially shift the oil market’s balance
OPEC’s first cut in production in eight years is not good news for the Spanish economy. Spain imports almost all the oil it consumes and has benefited enormously from the slump in the price of a barrel of this “black gold”. It’s estimated that every 10% drop in the price of oil allows for one-tenth of a percentage point improvement in Spanish GDP (1 billion euros). And the reverse is true when the price increases.
OPEC has finally agreed to cut production by nearly 1.2 million bpd from January and for 6 months, representing about 4.5% of global output. Now we need to ask two questions: will the cartel countries respect the agreement? What will happen with the recent investment deficit in the sector? Will it still be profitable for the big producers to extract oil?
UBS | It looks increasingly likely that at its meeting on 30 Nov next week OPEC will agree the production cut envisaged at its Sept extraordinary meeting. In Sept an OPEC-14 produc tion target range between 32.5 -33.0Mbd was agreed, designed to accelerate inventory draw -down and bring fwd re-balancing.
Oil demand in both Emerging Markets (EMs) and Developed Markets (DMs) has risen strongly since 2014, but now the oil market will have to rely on EM consumption, according to a BofA Merrill Lynch Global Research report.
Julius Baer Research| As speculation swirls ahead of next month’s informal oil producer meeting, it feels like ground hog day in the oil market. With prices diving into the lower 40s per barrel, talks about supply cuts from oil cartel’s members, OPEC, have resurfaced. We see the chances of any action as exceptionally slim.
The IEA estimates that the drop in production in non-OPEC countries, mainly the US, coupled with the positive trend in demand, could foreseeably shut off the excess of supply in the second hald of 2016, returning stability to the oil market.
Carlos Díaz Güell | Without doubt he has been thinking about it for many years, but the chairman of Repsol has waited patiently to show himself in the best light and make friends a few days ahead of today’s OPEC meeting taking place in Vienna, against a backdrop of highly volatile oil prices.
BARCLAYS | The Doha meeting, among 16 oil producers (OPEC and non-OPEC) concluded on Sunday, without an agreement on a production freeze. The much-awaited meeting exposed the political rift between Saudi Arabia and Iran, and ultimately doomed the agreement. Representatives from Saudi Arabia, Russia, Qatar and Venezuela agreed on a draft in advance to be put forward to the group, but the Saudis changed their stance on Sunday morning.
UBS | Given the re-emerging importance of Iran, we spent time digging into the operating environment in Iran and speaking with oilmen on the ground there.