Summary
- OPEC+ has announced it will slash oil production quotas by 2MM bbl/d, effective November.
- This informally confirms that OPEC+ has very little remaining capacity to increase oil output, and we think production is likely on a declining trajectory.
- As OPEC+ supply continues to surprise to the downside and global oil demand edges higher, the oil market may be entering a new regime where $100+ oil is the new norm.
Market Implications
- We think oil prices should be elevated in the medium to long term.
- In this environment, oil & gas producers – which are already experiencing record free cashflow generation at $80 WTI – will benefit disproportionately.
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