Fitch Solutions Offers OPEC+ Prediction

Fitch Solutions Offers OPEC+ Prediction
'We expect a substantial cut to be made'.

Fitch Solutions Country Risk & Industry Research expects a “substantial” production cut to be made at the next OPEC+ meeting on October 5, a new report from the company has revealed.

“We expect a substantial cut to be made, which will not only help to tighten the physical market balance but sends an important signal that the group will continue prioritizing prices over production,” analysts at Fitch Solutions stated in the report, which was sent to Rigzone.

“At the very least, this should put a floor under Brent at current levels and may set the stage for a near-term rally,” the analysts added.

In the report, the Fitch Solutions analysts highlighted that the group is reportedly mulling a collective cut in excess of one million barrels per day, which they pointed out is equal to over one percent of global supply.

“Given that half of the OPEC members, as well as Russia, are already producing below their quotas and are facing further, involuntary production declines, the impact of any such cut will depend on what reference level is used to calculate it and how it is pro-rated across the group,” the analysts stated in the report.

“An additional voluntary cut by Saudi Arabia (and other Gulf states) would be particularly bullish for prices,” the analysts added.

The report revealed that Fitch Solutions is forecasting that the Brent crude oil price will average $105 per barrel in 2022, $100 per barrel in 2023, $88 per barrel in both 2024 and 2025, and $85 per barrel in 2026. Fitch Solutions warned in the report however that, on balance, the risks to their outlook “lie firmly to the downside, against a firming U.S. dollar, elevated financial market volatility and the ongoing slowdown in the global economy”.

The Bloomberg Consensus, which was also highlighted in the report and which Fitch Solutions is a contributor to, sees Brent averaging $101.7 per barrel this year, $94.6 per barrel in 2023, $87.5 per barrel in 2024, $82 per barrel in 2025, and $80.1 per barrel in 2026.

Brent has steadily declined over the past few months, dropping from over $123 per barrel in June to under $90 per barrel in October. At the time of writing, the price of Brent Crude oil is trading at $91.96 per barrel.

The 45th Meeting of the Joint Ministerial Monitoring Committee and the 33rd OPEC and non-OPEC Ministerial Meeting will take place in person at the OPEC Secretariat in Vienna, Austria, according to OPEC’s website, which highlights that the events will be the first in-person ministerial meetings since March 2020.

At the 32nd OPEC and non-OPEC Ministerial Meeting, which was held via videoconference on September 5, the group decided to revert to the production level of August 2022 for the month of October 2022, noting that the upward adjustment of 100,000 barrels per day to the production level was only intended for the month of September 2022.

To contact the author, email andreas.exarheas@rigzone.com


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