We now have a clear roadmap. Discussions on targets have been pushed to the end of next year, and the baseline issue with the UAE has been resolved. The cuts at the upper range of the voluntary tranche of 2.2 million b/d, were anticipated to return to the market gradually to avoid imbalance, but this will be a gradual increase through September next year. The additional 300, 000 b/d from the UAE will not be fully realized
until the end of Q3 next year. So, overall, the increase in supply is minimal, and the market may in fact demand more supply sooner. Production in the US has been flat to declining for eight months and that is unlikely to change anytime soon. We may reach a point where US supply hasn’t grown in a year, which is significant when considering longer-term trends. Market conditions will dictate when increased supply is justified, and there’s also room in the numbers for adjustments if those change.
What is the immediate outlook for demand?
The third quarter is expected to see an additional million barrels a day in global demand compared to Q2, which should be reflected in inventory levels. Additionally, when more people recognize this tightening in US supply, it could trigger the next upward movement. However, the initial shift will likely come from speculative short positions reassessing their stance, and some long positions returning to oil, especially as other commodity markets face challenges.