(Guest) Dr. Anas Alhajji Gives His Take On The Latest OPEC+ Production Increase And Why It's Not That Bearish
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The OPEC+ group of eight decided to unwind the 1.6 mb/d voluntary cut, as expected in our report three days ago. We now have clarity on the timeline and rationale. The impact was discussed earlier (copy below). They will begin with 137 kb/d in October and meet on October 5 to set November production levels. Aramco’s OSP, due in hours, will indicate the decision’s bearish or bullish nature.
Oil Market/OPEC+ Update: Sentiment & Narratives vs. Reality
This note explains why the oil market may not be as bearish. Oil bears overlook key points, and their perception misaligns with reality. We also analyze the impact of unwinding the 1.6 mb/d cuts and the potential gap between actual market balances and sentiment, particularly in the short term.
Sentiment will shift as reality sinks in, though it will take time. Stronger negative sentiment could lead to a faster oil price rebound.
The strong bearish sentiment in the oil market is unwarranted and intentionally fabricated. The notion of peak oil demand is also fabricated, supporting bearish sentiment in Q4 and 2026. Strangely, the International Energy Agency (IEA) and Chinese oil majors agree, underestimating demand growth, broadcasting low demand projections globally, only to revise them upward later. Why do major banks and Chinese oil companies share this view? If oil demand in China is peaking, why have China's oil inventories recently hit record highs? Why do the Chinese promote their forecasts of peak oil demand but withhold actual demand figures? Why are they increasing domestic oil production if demand is peaking?
Some bearish sentiment is justified: trade wars, tariffs, President Trump's unpredictability, media unreliability, and sudden changes by OPEC+ group of eight to its unwinding plan in recent months. The group, after unwinding 2.2 mb/d voluntary cuts, is now considering gradually unwinding 1.6 mb/d cuts. While the market impact is limited, sentiment may amplify it and we end up with “entrenched bearishness”. Ironically, the more bearish the sentiment, the faster oil prices will rebound.