Wow ... TD see oil lower but not for quite some time.
- A material rally or decline is unlikely until the market hears details on how the OPEC+ group settles the request from the UAE to increase its production base. If the producer group limits monthly supply increases to the previously discussed 400k b/d per month through December, we project that WTI may well challenge $80/b some time during Q3-2021, despite COVID-19 Delta variant risks.
- It is unlikely that the end to sanctions against Iran will result in an outsized change in supply-demand conditions through much of that period. However, if no OPEC+ plus deal is made and all members produce to capacity, there will be a very large surplus and prices may see a very sharp declines.
- After current uncertainties and a period of elevated prices, we believe that OPEC+ will come to an accord which will continue to see supply match demand growth, with WTI prices then trending back to near $70/b over the next twelve months.
TD Securities with that note.
Meanwhile, oil analyst Vanda Insights also see an accord between the Saudis and the UAE being reached ... but
- the broader bullish narrative remains intact.
Citing (snippet from a longer piece):
- US oil stockpiles continue to decline rapidly
- UAE oil producer ADNOC ... is declining requests for additional barrels
- US shale activity remains in feeble recovery mode
- Saudi Arabia is anxious to ensure that the tapering of cuts by the alliance remains slow and measured through 2022
