OPEC+ confirms November production hike of 137kbd – Société Générale

Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman confirmed on Sunday (in a 9-minute meeting with no objections) their intention to collectively increase production by 137kbd in November, Société Générale's FX analysts note.

Oil rallies as OPEC+ signals limited spare capacity

"Saudi Arabia and Russia will see the same production increase of 41kbd—the largest within the group. When electronic trading resumed on Sunday evening, both WTI and Brent were up +1.45% (and at the time of writing, 1.80%)—a sign that markets priced in an expectation of a greater hike and, perhaps more importantly, a growing consensus that spare capacity is quite limited. Indeed, this expectation is reinforced by observations that actual physical output is generally about half of what the cartel originally announced."

"According to the OPEC 8 press statement, this decision was made based on “current healthy market fundamentals,” such as low inventories, which was the focus of our latest outlook. The decision may also have been influenced by a continued weak dollar, which reduces producers’ revenues when converted to their local currencies (except for the pegged Saudi Riyal)."

"The next meeting of the eight countries is scheduled for November 2. Since steep aligns with our base case scenario described in our September Outlook: Fundamentals to the Fore, we maintain the course of our forecasts and expect that when the curve flips into full contango, it will evolve into a fairly steep structure pricing in low longer-term supply, as spare capacity could create supply issues in the longer term as the market doesn’t have adequate buffers."