Saudis Pledge Million-Barrel Cut at OPEC+ Meet; Oil Surges
The price of oil rose on Monday following Saudi Arabia’s decision to cut oil production in July, but commodity experts are split on what the move could mean for oil prices in the long run.
“It’s a one month deal and there's nobody else jumping in to help so it makes it a unique situation,” Robert Yawger, managing director and energy futures strategist at Mizuho Americas, told BNN Bloomberg on Monday.
Yawger noted that the cut didn’t result in too much bang for the buck and cautioned that whatever supply the Saudis are taking off the market, Russia could easily supply.
“In a way, this is as much a test of Russia’s loyalty to OPEC+ as much as it is a move to get some control over oil prices,” he said.
In the event that Russia does supply oil to Saudi customers, such as China and India, then we’ll likely see oil prices under pressure, Yawger added. He is forecasting oil to hover around US$72 per barrel in the next 12 months.
“I think the market is largely skeptical of the cut,” he added.
STILL BULLISH ON OIL
One person who is not skeptical, however, is Eric Nuttall, partner and senior portfolio manager of Ninepoint Partners.
Nuttall is extremely bullish on oil and has called for prices to reach beyond US$100 per barrel in the coming months.
“Global oil inventories, even with demand loss in the U.S. and Europe due to a presumed recession, were set to end 2023 at a six plus year lows. Now, the magnitude of draws this summer, owing to Saudi’s additional cut, all but ensures this outcome,” he told BNN Bloomberg in an email on Monday.
Nuttall believes a tightened oil supply and an increase in demand will ultimately send the commodity higher.
“The low for oil should now be in, and investors should fully allocate given what we see coming at us in the coming months,” he said.