Sixty-three years to the day after the coronation of Elizabeth as Queen of England at Westminster Abbey, OPEC once again tries to prove itself as kingpin of the oil market. With an acronymtastic day today, courtesy of the ECB, ADP – and OPEC too – here are five things to consider in oil markets:
1) Perhaps the most telling thing in today’s OPEC-related news is an interview with new Saudi oil minister Khalid al-Falih. He affirms that the Kingdom’s is continuing to target market share, saying ‘Saudi Arabia is in it for the long-haul, and our long term direction remains the same’. He sees the market on its way to rebalancing, helped by shrinking supply, with demand boosted by moderate prices.
He also highlighted that the drop in oil investments over the last two years will increasingly impact higher-cost production going forward, saying ‘it is natural that the marginal producers of expensive oil that were growing the fastest when prices were healthy are now declining the fastest’. He may also have just declared victory on U.S. shale, suggesting that the OPEC strategy that the kingdom pushed for in 2014 is working, ‘and the long term will prove this‘.
2) In addition to the presence of the new Saudi oil minister, two developments from the latest OPEC meeting is the appointment of a new secretary-general (Mohammed Barkindo from Nigeria), while Gabon has rejoined the cartel after leaving two decades ago.
Gabon is now OPEC’s smallest producer (relieving Ecuador of its duty); the West African nation exported 185,000 bpd of oil last year, with China being the leading recipient (no shock there), accounting for