ANZ on oil: Events raise probability of more aggressive production curbs

From ANZ's weekly commodity piece ... events raise the probability of the Saudi Arabia taking a more aggressive stance on production curbs

In brief from the note:

• the likelihood of a disruption to supply remains low
• we believe the events raise the probability of the Saudi Arabia taking a more aggressive stance on production curbs
• the risks now lie towards curbs remaining in place longer than expected
• As such, we see oil prices remaining well supported in the short term
• ... the kingdom is faced with significant challenges as its fiscal position has continued to deteriorate since the era of USD100/bbl oil ended in 2014. This means the prospect of prices falling back below USD50/bbl is just too big a risk. We believe Saudi Arabia would rather over-tighten the oil market than risk prices falling again
• We see the possibility of a more staged approach to the phase-out of the agreement once it expires. The reversal of a 1.8mb/d production cut was always going to be difficult for the market. So a gradual and more disciplined return to normal production levels will take some risks out of the market over the next 18 months

(bolding mine)