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If the selloff in oil continues and prices continue down, OPEC may well swing into action, RBC Capital Markets’ head of global commodity strategy Helima Croft told the Australian Financial Review today.
“OPEC looks content to stay the course on the current production policy and is seeking to stay out of the confrontation between Russia and the West,” Croft said. “Nonetheless, we see clear scope for OPEC to adjust the production cut.”
OPEC+ agreed on production cuts last year as the oil price rally from earlier in 2022 fizzled out and demand concerns pushed benchmarks down. The cut, formally set at 2 million bpd from the collective production quota, but effectively at half that, should be in force until the end of this year.
Yet the Saudis have repeatedly demonstrated that they are not averse to quick changes in policy, RBC’s Croft told the AFR, noting Energy Minister Abdulaziz bin Salman’s “willingness to make quick course corrections in order to ensure market stability and safeguard national interests”.
As a result, RBC expects Brent crude to average $96 per barrel this year, with West Texas Intermediate seen at an average of $92 per barrel. At the moment, both benchmarks are trading below $80 per barrel.
In her expectations of OPEC action on prices, RBC’s Croft echoed the opinion of Pioneer Natural Resources’ Scott Sheffield, who said earlier this week that the Saudis won’t let oil sit at $75 per barrel.
“Saudi is not going to let Brent stay around $75 a barrel,” Sheffield said, adding that it wouldn’t surprise him “if they had another cut.”
Sheffield also forecast oil prices at a minimum of $80 per barrel this year, with a potential for rising to $150, joining a number of forecasters expecting higher oil prices this year despite the weak start to the year.
