With the oil market set to keep tightening, CIO expects Brent to rise to USD 95/bbl by end-year. (UBS)

At the last OPEC+ meeting in early June, Saudi Energy Minister Prince Abdulaziz bin Salman said the group will do “whatever is necessary” to support market stability and balance the oil market. Indeed, the previous OPEC+ production cuts are starting to bear fruit—oil inventories are declining both on land and on water, and oil prices are recovering. The Saudis are also putting their money where their mouth is by slashing exports. Saudi crude exports (excluding flows from the Neutral Zone) were estimated at 5.473mbpd in the first 27 days of August, down more than 0.9mbpd m/m and at the lowest level since April 2021, according to Petro-Logistics.

The Kingdom’s voluntary extra production cut of 1mbpd should remain in place in September, and we expect more clarity over the coming days on whether it will be extended to October. We continue to think Saudi Arabia will reduce the cut only when it believes the oil market is stable enough to warrant it (i.e., when global oil inventories are lower than now). Considering OPEC+'s cautious, proactive, and preemptive approach to achieving a stable oil market, the voluntary cut could remain in place given concerns about China’s recovery, despite potentially record high crude imports in August, and the impact aggressive monetary policy tightening may have on economic activity in Europe and the US.

With the oil market set to keep tightening, we expect Brent to rise to USD 95/bbl by end-year.

Main contributor - Giovanni Staunovo

Original report - Crude oil Saudi crude exports at a 28-month low, 31 August 2023.