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As the group doubles down on its production cut, questions linger about exit strategy, capability, and size.
Oil majors may not be entirely out of the woods yet, but first-quarter performances suggest that they are on the upswing after nearly three years of mostly red ink.
OPEC’s strategy centers around restricting supply to the Atlantic basin since inventory data in the U.S. is the most timely and visible in the world. From February to early April, U.S. imports from Saudi Arabia have plummeted by about 462,000 b/d.
Big merchant traders like Vitol, Trafigura, and Glencore are expected to aggressively explore opportunities to grow in order to diversify their asset and customer bases and mitigate risk.
The growing confidence among hedge funds for higher prices and the expectation of a tighter market during the second half of the year make it more likely than not OPEC will continue to manipulate output.
If fundamentals weaken and oil market sentiment shifts, a sharp price correction is likely once investors liquidate their long positions.
While U.S. crude production hasn’t fully recovered, it has increased by more than 300,000 b/d since September to average just under 9 million barrels per day. As a result, the OPEC-fueled boom in prices has stalled for the time being.
The group has been adamant about putting together a united front to show that it will follow through with production cuts and counter critics who doubt its willingness or capability to do so.
The OPEC commission would examine whether the cartel’s behavior is designed to disadvantage U.S. oil producers and secure market power through anti-competitive behavior.