In an oil and gas report sent to Rigzone late Tuesday by the Macquarie team, Macquarie strategists said they believe the structural landscape has increasingly been shifting towards a return of OPEC supply.
“Beyond a potential return of shut-in production, upstream growth potential across the group has been stacking up, with Saudi Arabia scheduled to bring large field expansions online in 2025, UAE continuing to grow capacity, Kazakhstan delivering a long-delayed Tengiz expansion, and now Iraq reaching an agreement for Kirkuk redevelopment,” the strategists noted in the report.
The Macquarie strategists outlined in the report that the statement posted on OPEC’s site on Monday – which revealed that Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman will start unwinding a 2.2 million barrel per day cut from next month – “is not entirely surprising”. They added that “the proactive nature of the return of supply (with prices still at the lower end of the recent range) is likely to be viewed bearishly”.
The strategists also highlighted in the report that, “broadly speaking”, they “have seen no indication that OPEC+ is angling for a renewed price war with non-OPEC producers”.
“While we believe fiscal break-evens are overstated as drivers of oil price, they cannot be altogether overlooked,” they added.
The Macquarie strategists went on to note in the report that, “while we do take the OPEC+ release at its word regarding language around ‘flexibility’, we believe inertia on the existing plan cannot be dismissed”.
“Put alternatively, while OPEC+ may indeed seek to steer markets towards stability, resistance to future pauses/cuts could emerge, creating potential for crude overshooting to the downside in 2025,” they said.
In a report sent to Rigzone by Standard Chartered Bank Commodities Research Head Paul Horsnell late Tuesday, analysts at the company, including Horsnell, said the statement posted on OPEC’s site “stressed that the return of oil ‘may be paused or reversed subject to market conditions’ and noted that those countries which produced above target in 2024 will front-load their compensation plans”.
“The month on month increase in targets in April amounts to just 135,000 barrels per day (not allowing for the potential offsetting effect of an acceleration in the payback of past over-production),” they pointed out.
The analysts highlighted in the report that, in their view, “proceeding with the plan required positive answers to three questions”. These were, “one, does the oil balance imply the additions can be easily absorbed?”, “two, is there market backwardation signaling a tight prompt market?”, and “three, is there anything in the current price level that signals definitively that there is too much economic or political uncertainty to proceed?,” the report showed.
The Standard Chartered analysts said in the report that they think the answers to one and two are clearly yes, “leaving the main discussion about whether three provides a third green light”.
“Our balances imply that the unwind does not produce any significant surplus, with a mild surplus in only Q4-2025 and Q4-2026. Robust demand growth and a continued slowdown in U.S. oil liquids supply are creating the room for the cuts to be unwound,” the analysts said in the report.
“On two, Brent backwardation remains robust and has strengthened over the past month,” they added.
“On three, current prices are low and affected by U.S. tariff and geopolitical policy uncertainty. However, we think OPEC+ was right to proceed; it has the opportunity to pause each month and, in our view, current prices are not a pure signal but an undershoot exacerbated by speculative flows towards the short side,” they went on to state.
In a market analysis sent to Rigzone on Wednesday, George Pavel, General Manager at Naga.com Middle East, said, “crude oil futures have continued to decline for the fourth consecutive session, pressured by OPEC+ plans to raise output in April and ongoing trade tensions”.
“The production increase could contribute to a bearish outlook for global crude prices,” he added.
In a separate market analysis sent to Rigzone today, Rania Gule, Senior Market Analyst at XS.com – MENA, said, “this move by OPEC+ seems to align with a new policy that may be driven by political maneuvers, especially amidst the rising tensions of recent times”.
Rigzone has contacted OPEC for comment on the Macquarie and Standard Chartered Bank reports and on Pavel and Gule’s statements. At the time of writing, OPEC has not responded to Rigzone.
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