In the latest episode of the soap opera that is the global oil market, we witnessed oil prices doing a graceful swan dive, thanks to the newest plot twist by OPEC and its buddies. The gang decided it was time for a little production cut party through the early days of 2024. Normally, this kind of shindig would send prices soaring like a rocket, but surprise, surprise – Brent crude, the cool kid of international benchmarks, barely batted an eyelid, slipping a modest 0.3% to $82.83 per barrel. Talk about anticlimactic!
Before this grand reveal, the rumor mill was churning out tales of deeper cuts, sending prices on a bit of a joyride. But when reality hit, it was like expecting a lion and getting a housecat. And let’s not forget OPEC’s brilliant move to let individual countries play Chinese whispers with their cut numbers, leaving investors more confused than a tourist without Google Maps.
Roth MKM’s Leo Mariani couldn’t hold back his critique, calling OPEC+ communication skills ‘horrific’. It seems like their press release was about as clear as mud, causing a collective freak-out and a sell-off bonanza. OPEC’s cuts are supposed to be the oil market’s Red Bull, giving prices wings, but sometimes they backfire, whispering tales of future demand woes.
And let’s be real, do we really believe these OPEC producers will stick to their word? History has shown us that oil cut announcements and actual cuts have as much in common as cats and water – they don’t always mix well. As Rhys Williams from Spouting Rock Asset Management puts it, the market’s playing a high-stakes game of ‘wait and see’.
But hold on, there’s a plot twist! Mariani, our clairvoyant analyst, predicts these cuts will eventually pump up prices next year, targeting a cool $87 per barrel for Brent. Others are also chanting the ‘rise, prices, rise’ mantra, expecting demand to strut its stuff as OPEC plays hard to get with supply. The chance of a 2024 global recession seems to be shrinking in the rearview mirror, with the Energy Information Administration playing fortune teller and setting Brent’s 2024 price target at a lofty $93.24.
In a twist that no one saw coming, Brazil crashed the OPEC+ party, announcing plans to join the club in January. Could this mean Brazil starts turning down its production volume knob? Maybe, but for now, their largest oil producer Petrobras watched its shares do a little dip of their own, falling 0.7%. Brazil’s been the party pooper this year, cranking up production and raining on OPEC’s parade.
The OPEC meeting, originally scheduled for last week, finally happened amidst some behind-the-scenes drama. Considering the role of oil prices in inflating inflation faster than a balloon at a kid’s birthday party, investors have been watching OPEC like hawks, ready to swoop in on any move that could send crude prices sky-high. But for now, it seems like the oil market is content to slide down the slippery slope of uncertainty, leaving us all wondering, “What’s next?”