(WCTW) Saudi Says
"I control the oil market."
Saudi says, "Tight crude."
Saudi says, "No visible inventory builds."
Saudi says, "No more cuts."
Saudi says, "$65 to $70 Brent."
Saudi says, "I'm in control."
That's the global oil market in a nutshell today. Like the childhood game Simon says, whatever the Saudis want, whatever the Saudis will get. We first wrote about this in a WCTW report on May 27. We made it public today.
At HFI Research, we have been well ahead of the curve on the OPEC+ production cut that started at the end of 2023. Do you remember the commentary from oil pundits that once the voluntary production cuts unwind, oil prices will fall into the $40s?
Well, they are nonexistent now. OPEC+ or the V8 agreed over the weekend to decrease the voluntary production curtailment by 548k b/d, or 1 month faster than the 3-month truncated production increase before (411k b/d).
Oil prices ended higher, which befuddled a lot of market participants.
If OPEC+ is increasing production, why are oil prices moving higher?
Well, that's because it was never a cohesive production cut to begin with. Rampant cheating has been obvious for those who pay attention to OPEC+ crude exports.
And out of all the charts I've seen following the OPEC+ meeting, this one by Giovanni Staunovo is at the top of the list.
Source: Giovanni Staunovo
As you can see, the V8 production has finally caught up to the production ceiling. The cheaters are now in compliance and will finally be able to "compensate" for all of the previous overproduction from before.
So, what does this mean going forward? With the Saudis in full control, what does the incoming oil price path look like? Will Q4 global oil inventories surge like the consensus is expecting?
Let's dive into this week's WCTW.