Macquarie Bank Ltd. remains bullish on oil prices over the short-term although structurally bearish on the market after the weekend OPEC+ meeting.
OPEC’s actions should tighten direct crude balances through third-quarter 2023, Macquarie’s global strategists Vikas Dwivedi, Emily Leivy and Walt Chancellor wrote in a June 6 research report.
From there, they foresee a correction in fourth-quarter 2023 and into 2024 due to growth in sweet oil production in the U.S. and North Sea, as well as through OPEC+ non-compliance and slowing demand due to recessionary effects.
“The structural challenge for the oil market is the ease of oil production growth, a feature we believe will persist for several years,” according to the strategists.
For Macquarie, the recent OPEC+ meetings yielded three key points including voluntary production cuts that commenced in May 2023, which have been extended through year-end 2023. Saudi Arabia left open the possibility of maintaining its 1 MMbbl/d production cut past July. And the updated 2024 baseline production levels also offer further clarity for the market.
Macquarie said a voluntary cut by Saudi Arabia has the potential to shrink sour discounts and further compress U.S. refinery margins.
The three Houston-based strategists said macro concerns associated with the impact of recessionary pressures on demand are potentially limiting the ability for OPEC+ intervention to support price.
“Demand is a key part of the balance that has the most uncertainty, with the market focusing on Chinese demand growth. Currently, the IEA [International Energy Agency] is attributing around 60% of 2023 global demand growth to China; in contrast we estimate China will contribute approximately 35%,” they said.
2023-09-25 - In this Hart Energy LIVE Exclusive interview, EQT CEO Toby Rice describes what unleashing the U.S. LNG sector would look like.
2023-08-03 - Crown LNG Holdings and Catcha Investment Corp. are merging to form Crown LNG Holdings Ltd., with hopes to go public on the NYSE.
2023-09-19 - With ecosystem maxed out, surplus supply and infrastructure capacity are needed to respond to the next “event,” EQT Corp. president and CEO Toby Rice said.
2023-09-18 - Exxon Mobil CEO Darren Woods joined the leaders of Aramco and China National Petroleum Corp. in calling for governments not to prematurely pull the plug on the current energy system at the World Petroleum Congress.
2023-09-22 - Phase 2 of Sempra Infrastructure’s Port Arthur LNG would add two liquefaction trains with an LNG liquefaction capacity of 13 mtpa.