No, We Still Don’t See $100 Oil

The failure of OPEC+ to formally ease production quotas is not what we had expected, but it doesn’t pave the way to $100 oil. A 500,000 barrel increase is already on the books for July. Cartel members almost always cheat anyway. By next month Saudi is likely to find a way to accommodate the UAE’s demand for a higher production baseline against which to measure quotas, although by the same logic Saudi would be entitled to the same and more. This will lead to production increases of 400,000 to 500,000 barrels through the end of the year. After that the existing quota system will expire in April 2022 anyway; it is not likely to be extended. With the restart of the Iran nuclear deal becoming less likely, Saudi can afford to make room for a little UAE oil rather than a lot of Iranian oil. Saudi wants to cement OPEC’s role as swing producer, and its own reputation and influence in the region, especially versus Iran.