Commodities Weekly: OPEC’s Unstable Equilibrium
- By Viresh Kanabar
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- 4 min read
Summary
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- OECD inventories have fallen below 2790mn barrels from 2822mn barrels in May. This has helped speculative positioning in the oil market normalise. Our inventories-based model prices Brent at $83 a barrel.
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- Given the extraordinary level of production cuts required to tighten the oil market, further price increases make extending production cuts less likely. We characterise this market as being in an unstable equilibrium.
Summary
-
- OECD inventories have fallen below 2790mn barrels from 2822mn barrels in May. This has helped speculative positioning in the oil market normalise. Our inventories-based model prices Brent at $83 a barrel.
-
- Given the extraordinary level of production cuts required to tighten the oil market, further price increases make extending production cuts less likely. We characterise this market as being in an unstable equilibrium.
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