Morgan Stanley forecasts that OPEC+ will restore all 2.2 million bpd of previously cut output by October, mainly benefiting Saudi Arabia.
Goldman Sachs anticipates a smaller, short-term increase in August, citing strong oil demand fundamentals and geopolitical risks.
Despite the expected supply boost, oil prices climbed due to escalating Ukraine-Russia tensions and a surge in U.S. gasoline demand.
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Oil prices climbed on Monday morning despite expectations that OPEC+ will continue to boost production in the coming months.
Morgan Stanley commodity analysts expect OPEC+ to make three new monthly boosts to its output, returning all 2.2 million bpd it agreed to remove from the market in 2022, by October.
This will keep oil prices lower, the bank noted, writing that “With this latest announcement, there is little sign that the pace of quota increases is slowing down,” as quoted by Bloomberg.
“Higher quota will likely create room for increased production in Saudi Arabia, and to an extent in Kuwait and Algeria. However, we do not expect that quota increases will lead to commensurate production increases for the rest of the ‘Group of 8’,” the analysts also wrote.
Goldman Sachs also expects OPEC+ to add more supply, but only in August. After that, the investment bank said in a note, it expected the cartel to stop bringing production back thanks to “Relatively tight spot oil fundamentals, beats in hard global activity data, and seasonal summer support to oil demand.”
Oil prices, meanwhile, moved higher today despite OPEC+’s latest announcement on production as traders focused on geopolitics and, more specifically, on the latest escalation between Russia and Ukraine, which has once again dimmed the prospects of a lasting peace anytime soon.
At the time of writing, Brent crude was trading at above $65 per barrel, with WTI at $63.25 per barrel after a large-scale drone attack by the Ukrainian side on Russian targets that led to expectations of an in-kind response.
Yet there were also fundamentals supportive of higher prices, in addition to the perception that the latest OPEC+ hike has already been factored in by traders.
“More encouraging was a huge spike in gasoline implied demand going into what’s considered the start of the U.S. driving season,” ANZ analysts said in a note, as quoted by Reuters.
Credit: Oilprice.com
