OPEC+ Cuts Keep Oil Looking Up

April 20, 2023 - 1 minute 30 seconds
Aerial photo of an oil rig surrounded by ocean.

Crude oil continues to hold on to strong gains despite broad concerns surrounding global economic weakness and a lackluster risk appetite. The market appears to be focused on the EIA data showing broad inventory draws and the unexpectedly large OPEC+ production cuts. The crude complex is pricing a much tighter supply-demand environment for the rest of 2023. This move puts previous OPEC statements suggesting a Q2 surplus and demand concerns amid the evolving bank crisis in the rearview mirror.

We judge that the combination of OPEC+ cuts, low U.S. petroleum complex inventory levels and the upcoming sharp increase in Chinese demand could send WTI Crude into $90+ territory in the second half of the year, with Brent Oil price not far off the triple digit mark. However, pending economic weakness in the Western world could affect that estimation.

As U.S. shale producers are not spending free cash on capex, OPEC is the only one with spare capacity and the ability to swing production. The cartel may be able to keep markets very tight in order to maximize national revenues. We judge that they may be slow to hike production, even if prices spike for a short period as there is nobody in the wings threatening their share of the global oil market.

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Portrait of Bart Melek


Head of Commodity Strategy, TD Securities

Portrait of Bart Melek


Head of Commodity Strategy, TD Securities

Portrait of Bart Melek


Head of Commodity Strategy, TD Securities

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