Two days ago, Christyan Malek, JPMorgan’s head of energy strategy, issued a warning that amidst the recent sharp decline in oil prices driven by factors such as shorting by Commodity Trading Advisors (CTAs) and actions by the Biden administration, the oil market might be underestimating the possibility of deeper supply cuts during the upcoming OPEC+ meeting scheduled for November 26.
Malek stated in an interview with Bloomberg, “The market’s probably assuming very little chance of that happening, I’d say it’s much higher than that – not as a base case but as a scenario.” He suggested that deeper cuts could be implemented “in order to get ahead of potential weakness in the first half of next year.” Malek emphasized the need for such cuts, stating, “We may need to see” a cut “given where the balances are, particularly given the demand trending.” a warning that amidst
Regarding concerns about Saudi Arabia’s production capacity, Malek expressed a different view, saying, “there’s a view that Saudi is tapped out,” but he disagrees. “I think there’s more flex if they wish to cut. We could see them do sizable cuts from here; having said that, I think it’s more likely they’ll want to socialize them among their OPEC peers – a collective cut rather than one on their own.”
And so, from JPM’s strategist to OPEC+’s ears because moments ago the FT reported that what until recently was unthinkable, is suddenly all too possible and largely thanks to the (mostly) Arabic resentment at what Israel is doing in Palestine: according to the FT, not only is Saudi Arabia prepared to prolong oil production cuts well into next year but Opec+ is weighing further reductions in response to falling prices and rising anger over the Israel-Hamas war.