Compared to the planned Phase 1 OPEC+ production cut of 9.7mbpd, the group only achieved 8.03mbpd in May with compliance rate of 82%.
Coordinated cut back occasioned by lower prices resulted in additional production decline of 3.04mbpd, resulting in total supply contraction by 11.1mbpd to 89.6mbpd in May, with Brent crude spot price averaging $32.7/barrel in May, up $5.3/barrel from the average in April.
The massive surplus of 21.5mbpd in April will push Q2 surplus to average 8.8mbpd, with a switch to deficit of 3.0mbpd in Q3 and a deficit of 3.1mbpd in Q4.
EIA forecasts Brent crude oil price will increase from the lows of Q2 to average $37/barrel in Q3 and $38/barrel in Q4. With adjustment for the extension of the Phase 1 OPEC+ cut until July, we see upside for prices compared to the estimate, especially in Q3.
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