The sell-off sparked by OPEC+’s announcement that it may scale back some of its production cuts was unjustified, and the outlook for prices is stronger than many think.
That’s according to Eric Nuttall, portfolio manager at NinePoint Partners. Said Bloomberg reported that OPEC+’s actual plan did not state that it would reverse the production cuts no matter what, suggesting there was a misunderstanding.
“it is [the selloff] “The issue is rooted in a strong misunderstanding of what was announced and what OPEC+ is trying to achieve,” Natal told Bloomberg.
“What is worrying is that eight member states that have voluntarily cut production have announced a roadmap to extend those cuts into the next quarter and gradually restore production from October,” the lender said.
“There is a misconception that there is a rigid plan to increase production and that there are concerns that economies such as the U.S. and China will weaken,” Nuttall explained, noting that OPEC+’s plan is “by no means set in stone.”
In this regard, NinePoint’s portfolio managers essentially echoed the same statements made by the Saudi Arabian Energy Minister and the Russian Deputy Prime Minister this week: there are no set plans to restore supply in the second half of the year, the plan is to assess whether market conditions are right to do so, exactly as OPEC+ stated in their official statement after their June 2nd meeting.
“The cornerstone of OPEC policy is to be proactive, proactive and preventative,” Nuttall told Bloomberg. “Anyone who follows OPEC knows this is not a rigid plan, it’s driven by market conditions.”
He also predicted that trader sentiment would soon change, with global crude oil inventory drawdowns set to accelerate significantly from next week.
By Irina Slav of Oilprice.com
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