Saudi, Russia, OPEC and Oil
We offer to your attention a summary of the key issues which are more likely to drive the oil price in 2017, prepared by Chris Weafer, Senior Partner at Macro-Advisory Ltd in Moscow.
- The verbal/political support for the production deal by OPEC and Russia should be enough to support the price of Brent crude close to $55 p/bbl over the winter and early spring.
- There is no reason to expect the price to spike much higher because of the prospect for increased US shale volumes if oil averages above $55 p/bbl. The evidence of compliance is more likely to disappoint the market in Q2.
- The greater risk is for the price to drop back to $50 p/bbl (or high $40s p/bbl) in Q2 or early summer, if (either) Libya delivers on its production plans, Nigeria fixes the damaged infrastructure, US shale output rises steadily or Russia misses its promised target cuts.
- But the risk of a drop to mid or low $40’s p/bbl is probably now gone because of the greater willingness of Saudi Arabia to take action to prop the price if/when required.