What To Watch Before The Next OPEC+ Meet

With the Fed’s decision to raise rates behind us, there are still multiple uncertainties threatening to keep oil prices unstable. In the current tight market, the Fed’s move to hike rates by 75 basis points sent WTI lower, but by less than 1%. Gasoline prices continue to tick down, but the risk of a slowdown in price reductions on this front remains. 

All eyes are on the OPEC+ meeting next week where the cartel will discuss the plan for September. While the OPEC+ agreement will be officially rolled back in August, the group has agreed to continue its cooperation and meet to discuss the state of the oil market, which Saudi Arabia and Russia discussed as recently as last week. There has been no public talk, however, of resetting any production quotas. So far, 5 OPEC+ sources who spoke to Reuters hinted that the group is likely to keep production targets steady for September, although two OPEC+ sources who spoke to Reuters suggested the group could consider a small increase. That hasn’t stopped the Biden Administration from proclaiming that it was hopeful OPEC+ would announce an increase for September.  

But the bigger item on the list of things to watch is that Saudi Arabia typically announces any pricing changes following these regularly scheduled meetings. If Saudi Arabia announces a price increase, it would be a good indication that it doesn’t have much spare oil to ship and has plans to increase its production for August and September by only a limited amount. 

Saudi Arabia produced 10.424 million bpd in June, shy of the 10.662 million bpd set for it under the quota. Saudi Arabia’s production has been steadily increasing, but at a slower rate than its quota. Overall, the group’s compliance is between 200%, or more than 300%, depending on whose figures you use, so their “plans” for September aren’t as revealing as some would hope. Saudi’s oil price plan, however, is something to watch. 

Other items on the watchlist are Gazprom’s turbine struggles. Siemens claims the turbine is just waiting for customs paperwork for Gazprom, while Gazprom is claiming–without elaborating–that the problem lies with Siemens. Either way, the turbine is not in service. Without this turbine returned to service, gas flows to Europe will remain restricted, impeding its ability to store gas for the upcoming winter (placing them behind for next winter, too), with Europe urgently talking about cutting energy consumption. 

Crude oil exports from the United States continue to be robust (record levels) and remain a to-watch item, rendering implied crude demand in the United another hot ticket item to follow as the market tries to decipher whether crude demand has fully recovered from the Covid era.