Possible OPEC crude output scenarios after the Algiers meeting agreement (see Market Watch – Issue 9).
- In our base case (assuming no cut or freeze for now), we see OPEC production increasing further mainly due to a gradual return of Nigerian production. In 2017, we expect a similar seasonal production pattern, which reflects the increased domestic demand in Saudi Arabia during the summer months.
- The first scenario assumes that the alleged deal includes action by Saudi Arabia and Iran, in which Saudi Arabia reduced output by some 500,000 b/d to 10.2 million b/d and Iran freezes its output at 3.6 million b/d. As a seasonal decline from Saudi Arabia is already part of our base case, this would only lead to a slightly stronger reduction over Q4 and a “shaving-off” of the summer peak next year. As a result, the annual average implied stockbuild would decrease by some 270,000 b/d.
- In scenario two we would still need cuts of around another 1 million b/d on top to actually reach the discussed output ceiling.
- The third scenario investigates a freeze at September output levels, which would lead to a reduction of oversupply by 400,000 b/d.