Oil Markets On Edge Ahead Of Saudi Arabia’s Next Production Cut Announcement
As the OPEC+ panel prepares to meet virtually on Friday, the oil market is more closely watching the next move from Saudi Arabia, OPEC’s top producer and de facto leader.
The Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ group, which regularly discusses the situation on the market and the need for OPEC+ intervention, is meeting in the early afternoon Vienna time on August 4 to take stock of the most recent market developments.
While the panel is not expected to make recommendations to the OPEC+ ministers to change current supply, all eyes will be on Saudi Arabia and whether the Kingdom will decide to extend its unilateral 1 million bpd cut for July and August into September, too.
Most analysts are inclined to believe that Saudi Arabia would extend the cut into September, as it would not be willing to rock the boat just as Brent Crude prices have recently rallied and stabilized above $80 per barrel.
“Having overseen a price recovery and a shift in market sentiment, Riyadh will not want to rock the ship by restoring 1 million barrels a day of supply that markets are now expecting to remain shut in,” Raad Alkadiri, managing director at consultant Eurasia Group, told Bloomberg on Thursday.
The JMMC is unlikely to change the current oil production policy of the alliance at the Friday meeting, several sources in the group told Reuters on Wednesday, as prices rallied to more than a three-month high.
Some analysts expect Saudi Arabia to announce the one-month extension of the 1-million-bpd cut after the JMMC meeting on Friday and ahead of the announcement of the official selling prices (OSPs) for Saudi crude grades loading in September. This announcement of the OSPs from Saudi Aramco is usually issued around the 5th of each month preceding the month of loading and is not accompanied by any comments on the price changes.
Early on Thursday, oil prices were slightly lower, following a sell-off on Wednesday that was prompted by a risk-off sentiment after Fitch downgraded the U.S. Long-Term Ratings to ‘AA+’ from ‘AAA’. Oil prices recovered quickly however and were soon trading flat.