After a load of speculations and postponements, the OPEC group finally delivered a press release, but there are still many uncertainties around the actual outcome of the meeting. On the surface, the supply cut deal is intensive, but given early hints of non-compliance from a couple of the African members, the market is not overly convinced. We disagree with the market take-away and see this as a strong supply message, but admittedly have to monitor the compliance on an ongoing basis in coming months.

Main conclusions up front:
– The supply cut is a strong message to markets if compliance is decently high
– The OPEC+ supply cut goes from a one-man-show to a small band
– Compliance with quotas is likely to increase over the next 1-2 months before fading again
– The EIA reports continue to underpin a stronger than expected demand for fuel/oil
– The Natural Gas demand has been exceptionally weak in November..

Snippet from the press release here:

“These additional voluntary cuts are announced by the following OPEC+ countries : Saudi Arabia (1,000 thousand b/d); Iraq (223 thousand b/d); United Arab Emirates (163 thousand b/d); Kuwait (135 thousand b/d); Kazakhstan (82 thousand b/d); Algeria (51 thousand b/d); and Oman (42 thousand b/d) starting 1st of January until the end of March 2024. Afterwards, in order to support market stability, these voluntary cuts will be returned gradually subject to market conditions. 

The above will be in addition to the announced voluntary cut by the Russian Federation of 500 thousand barrels per day for the same period (starting 1st of January until the end of March 2024), which will be made from the average export levels of the months of May and June of 2023, and will consist of 300 thousand barrels a day of crude oil and 200 thousand barrels per day of refined products.”

Chart 1: Supply versus Demand in oil space