Page 141 - RusRPTJul24

(including Russia and Saudi Arabia) on production in the amount of 2.2mn bpd, but begin to reduce them from October 2024. By the beginning of 2025, 750 thousand bpd will return to the market; by October next year, these restrictions should end. The market as a whole expected an extension of restrictions for six months until the end of this year.
Extend the voluntary restriction of these countries, in force from April 2023 in the amount of 1.65mn bpd, until the end of 2025.
Extend the cartel's group quota cap at just above 39mn b/d until the end of 2025.
Start reviewing quotas for individual countries. The quota for the UAE, which has repeatedly threatened to leave OPEC, has been increased by 300 thousand bpd starting in 2025. This decision should ease internal tensions within the cartel. Russia’s quota by the end of 2025, taking into account cancellations, will return to 9.45mn bpd, but it will have to compensate for excess production.
The lack of a unidirectional reaction from oil to the cartel’s decision shows that OPEC+ managed to indicate to the market a short-term balance that is close to current levels, and did not give a hint of a systemic excess supply. This is reflected in the organization’s release, which indicated the need for a “cautious proactive approach” to develop market benchmarks.
Goldman Sachs views OPEC+'s decisions as "bearish" on the back of rising US commercial inventories and points out that the easing of restrictions in a weak market is "unlikely to maintain reduced production levels." But UBS Group AG and RBC Capital Markets see a neutral effect, while other analysts see the prospect of a return to levels of $85 per barrel of Brent. All this, of course, in the absence of new geopolitical shocks and a collapse in the Chinese economy.
According to Bloomberg, OPEC+, led by Saudi Arabia, abandoned the unofficial target of “oil at 100”, which, other things being equal, foreshadows a slight decline in prices and global inflation. Expensive oil would have made it easier for the kingdom to finance the ambitious projects of Crown Prince Mohammed bin Salman Al Saud, but the Saudis once again seem to prefer predictability to revenue surges. Just over the weekend, the state received $12bn for another modest stake in Saudi Aramco, and before that it brought new external borrowings since the beginning of the year to $17bn—a record among developing countries.
The spillover effects of the OPEC+ decision should be beneficial for its members in the medium term. The global economy, boosted by relatively cheap oil, means stable demand and the opportunity to squeeze US shale producers.
141 RUSSIA Country Report July 2024 www.intellinews.com