Energy Market Research

BofA
The Organization of the Petroleum Exporting Countries (OPEC) may consider extending its production-cut agreement by another three months and the possible extension of the deal in May is fully priced in by the crude market, Bank of America (BofA) Merrill Lynch analyst Jean-Michel Saliba said in a note on April 12. “A renewal for a period of three months, rather than six months, is among proposals being examined, as it would allow monitoring and more flexible reaction to market developments,” the note said. “A return to a battle for market share when the agreement lapses should not be fully excluded at this stage. This could have negative implications for oil prices,” it added. “Preparations for the potential partial listing of Saudi Aramco in (the second half of 2018) could provide an incentive for Saudi Arabia to continue its efforts to manage the market through coordination with other oil exporting countries,” according to the note.
Citi
Oil prices may rise to $60 per barrel if OPEC decides to extend its accord to curtail production by 1.2 million barrels per day (bpd) by another six months after it expires in June, Citigroup said in a report on April 10. The oil market is expected to “rebalance sharply” in the second quarter of this year with “hefty inventory draw,” it said. However, prices may fall to the low $40s by end of the year if OPEC does not extend its output curbs when they expire this summer, it said. The bank explained that the surge in production by OPEC countries in the last months of 2016 just before the deal took effect, led to the “bloated” inventories in the first quarter of this year.
BMI
The researcher BMI has commented on Saudi Aramco’s monthly pricing list for May. Saudi Aramco cut pricing of its Arab Light crude to Asia by $0.30 per barrel for two months in a row as it seeks to increase competitiveness of the grade, Fitch Group’s BMI Research said in a note dated April 7. The company’s decision to cut oil pricing for some grades for sale to Asia in May shows a shift in its focus to light crude market to better compete with other crude grades that are priced on WTI and Brent, BMI said. Saudi Aramco prices its crude to Asia based on the average of Oman/Dubai crudes. The production cuts by OPEC and some non-OPEC members have increased Middle East benchmark Oman-Dubai crude prices relative to West Texas Intermediate (WTI)- and Brent-linked barrels, leading to more sales of US and European oil to Asia, BMI said. On the other hand, Aramco increased pricing to North America and that should decrease Saudi exports to the US in the second quarter, helping to draw down inventories thus supporting a short-term bullish outlook for Brent.

Source: Arab News