The issue here is that the group has been losing market share to other producers, especially the US, and yet it hasn’t achieved the high oil prices it hoped for by withholding supplies. At some point, a change was needed. As the forward curve remains in backwardation, we believe this is the moment they've decided to gradually reintroduce barrels without causing too much disruption. This approach is likely to continue over the next few months, but they're not opening the floodgates.
Is there a geopolitical dimension to the OPEC+ decision?
It's quite clear that the Saudis were waiting to understand President Trump's policies better before making any moves. They had discussions with Trump, both in Saudi Arabia and elsewhere, about his stance on Iran, his domestic production policies in the US, and his approach to Russia and Ukraine.
Very tumultuous times for the Western Alliance?
The rift is very deep, perhaps not irreversibly so, but it's hard to see an easy resolution where the US, Europe, and Ukraine can simply realign. Much trust has been broken but there's still a chance for improvement from where we stand now, despite the significant challenges. The suspension of US military aid to Ukraine announced today likely affects the supply of ammunition, mostly sent from the US to Poland and then to Ukraine. If it's immediate, it could impact the situation, although military analysts believe Ukraine is well-stocked with weapons and ammunition for the spring. Their biggest challenge is manpower. Still, a full suspension of US military aid would be a significant issue. An equally large concern perhaps would be if Starlink communications, vital for Ukrainian operations and managed by Elon Musk, were also suspended.