Oil Market Facing Uncertainty Ahead of First OPEC+ Compliance Report, RBC Capital Markets Says — OPIS

RBC Capital Markets is warning crude oil markets are likely facing about two months of uncertainty given that OPEC and its allies won't report compliance levels with recent voluntary production cuts until late January.

The bank's analysts also said that even including new supply from non-OPEC countries in 2024, they believe demand will outstrip supply for the entire year.

RBC offered no new price targets and said its estimated 2024 supply and demand balances assume complete compliance with the new OPEC quotas. It projected a 300,000 b/d stock draw in the first quarter, 500,000 b/d in Q2, 900,000 b/d in Q3 and 1.4 million b/d in the final quarter of the year.

The bank said the cuts agreed to at last week's OPEC will not be implemented until January, meaning the first reliable reports of compliance are probably about 60 days away. That will increase uncertainty in a market already dealing with ambiguity.

RBC's predicted 2024 oil market is similar to that seen from 2010 to 2019, when U.S. shale oil production was on the rise. The bank estimated U.S. crude production will rise by 400,000 b/d next year and believes output from the U.S., Brazil, Guyana and Canada will increase by a combined 1.9 million b/d by the end of next year.

While the bank believes the market will see supply deficits next year, it is in a "show me" stance with no clear catalyst for direction. Until statistics on cartel compliance are published, oil futures may in the near-term follow the path of least resistances and move lower.

The report also noted what it said were two surprises this year - an increase in U.S. oil production to about 1 million b/d and the failure of China's economy to meet expectations after it ended Covid-19 restrictions.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

-Reporting by Tom Kloza, tkloza@opisnet.com; Editing by Jeff Barber, jbarber@opisnet.com

(END) Dow Jones Newswires

December 04, 2023 11:53 ET (16:53 GMT)

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