Three scenarios for OPEC+ following collapse in talks – ABN Amro

OPEC+ has postponed its meeting until further notice. As the current production agreement runs until the end of July, there is still time to reach an agreement for August and beyond. Strategists at ABN Amro see three scenarios for the coming weeks.

OPEC+ come to an agreement in the coming days/weeks (before Aug 1)

“Oil production is increased as proposed and the deal is extended to December 2022. The production cut agreement would then be fully reversed by the end of 2022 and producers would then be producing at similar levels as before the April 2020 corona measures. The oil price would fall. (50% probability).”

OPEC+ sticks to the current July 2021 agreement

“This further increases scarcity in the market as oil demand continues to pick up. The oil price rises and breaks through the long-term downward trend that started in 2008. The upside price potential would then be high (at least to USD 86-87/barrel = 100% retracement level and highest level in 2018). (20% probability).”

There is no agreement and the OPEC+ cooperation is dissolved 

“Each country will, as in March 2020, again produce at its own discretion. Oil production will increase rapidly and oil prices will fall sharply. (30% probability).”