Rubber Meets The Road, OPEC+ Announces Production Cut And What It Means Going Forward

OPEC+ announced a surprise coordinated production cut over the weekend totaling ~1.6 million b/d starting in May. The production cut will last until year-end and will be on top of the "symbolic" ~2 million b/d it announced in October 2022.

The breakdown of the production cut is as follows:

Source: Bloomberg

Those of you who have read our articles regarding OPEC+ will know that we have been pointing out the "lack" of cut since the production cut announcement.

In this report, we will just break down exactly what is missing from the last OPEC+ cut and what we need to watch for going forward. The initial market reaction is correct to push oil prices higher, but in order for prices to sustainably move higher, we will need to see crude exports fall. What will be interesting about the latest announcement is that it will coincide with summer power burn demand in the Gulf coast countries. Normally, summer crude exports fall because of higher domestic demand, so the timing is interesting and could impact crude exports more than meets the eye.