In what one observer called "the fastest one yet" - the meeting lasted just 13 minutes, beating last month’s record for brevity - OPEC+ 23-nation coalition led by Saudi Arabia ratified an increase of 400,000 barrels a day on Wednesday, continuing the gradual restoration of output halted during the pandemic, according to delegate sources.
This was merely ratifying the plan - as expected - and notably gives no deference to President Biden's urgings for the cartel to raise production to rescue his approval ratings at home.
The quota breakdown is as follows:
Have tried twice yesterday to send headlines around the world of a 60mm barrel release from global strategic reserves, and now OPEC+ not helping, oil prices are re-extending gains this morning with WTI back above $110...
As we detailed last night, one reason for the continued surge in prices - despite all the hoop-la from Biden - is a rather grim assessment from Goldman which echoes what we said earlier, namely that yesterday's IEA release of 60 million barrels of emergency oil reserves will do exactly nothing to halt oil's tremendous surge higher.
As Goldman's Damien Courvalin writes, writing about the release of 60 mb of emergency oil reserves following Russia's invasion of Ukraine "we do not view this as sufficient relief, representing an only 1-month offset to a potential disruption to one-third of Russia's 6 mb/d seaborne oil export flows, for example, consistent with the rally in prices after today's announcement."
As such, Goldman reiterates its view - discussed here yesterday - that only demand destruction - through even higher prices - is now likely the only sufficient rebalancing mechanism, with supply elasticity no longer relevant in the face of such a potential large and immediate supply shock.
This leaves risk to our one-month $115/bbl Brent price forecast still skewed to the upside, with today's $105/bbl spot prices only at the level we believed was required to balance the oil market prior to any escalation in Ukraine.
Furthermore, Courvalin writes that a short-term deescalation or a potentially faster ramp-up in OPEC+ production would also not derail the bank's view for structurally higher prices, with Dec-23 Brent $24/bbl below our forecast; "Similarly, we do not expect a large price sell-off should an agreement with Iran be reached soon. Case in point, the global oil deficit in February is turning out to be twice as large as our above-consensus forecast while Iraq is experiencing 0.5 mb/d of outages, enough - if sustained and combined - to fully nullify Iran's potential return to the global oil market."
Additionally, this has all sent WTI and Brent time-spreads into what is being called 'super-backwardation' as WTI M1-M6 spreads explode to record highs suggesting the tightness of current oil markets is becoming extreme...
Are you ready for $4 gas at the pump, America?
Get back to work Mr.President...