This Sunday took place as planned the meeting of the OPEC oil cartel. This resulted in a cut in the group's future production quotas of 500,000 barrels per day for Riyadh, 211,000 barrels for Iraq, 144,000 barrels for the Emirates, 128,000 barrels for Kuwait, 40,000 barrels for Algeria and 40,000 barrels for Oman.
All traders seemed surprised by this decision, which comes on top of last October's decision to cut the cartel's production by 2 million barrels per day.
Recall that OPEC represents 30% of world oil production.
At the opening of the market it is a +5$ that was displayed at the price of a barrel of WTI (Brent opening 2 hours later also followed suit but less high, the price had already fallen).
What does this second quota cut mean?
Reading the 100 pages report published by OPEC we see that their growth forecast for Europe is zero for the year 2023... yes ZERO!
They were betting everything on the reopening of post-Covid China with fanfare... And unfortunately their expectations were not met as quickly as expected.
China depends heavily on the European market for its growth. As the Covid period reshuffled the cards and many European countries returned to producing locally.
China's manufacturing data having disappointed, it must be recognized that China is not resuming production as quickly as expected.
The period that was a real surprise for the markets was that of the banking crises, between SVB, Signature and Credit Suisse... The shock wave deployed on the markets made traders panic and made the barrel fall by -16 $ up to a strategic price level of 65 USD.
Earlier this year, the Biden administration also said that the resupply of US strategic reserves would take longer than expected and was not necessarily on the agenda this year.
Faced with this explosive cocktail of bad news for the price of a barrel, OPEP could not remain a spectator of this shipwreck.
That is why the cartel has pulled down its last card by cutting its production quotas once again.
"Surprise" for some, but expected for others...
The future will tell with the macroeconomic data of the week on the PMIs of the different countries and particularly the jobs in the US this weekend, whether or not the recession is potentially underway.
In the sucesptible balance of tipping oil prices in one direction or another: the potential next banking crises and slowdowns of the various economies VS the full and complete opening of the Chinese market.
Next episode.
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