UAE to gain from Opec+ decision on oil output

Vijay Valecha, Khaleej Times, December 9, 2024

The UAE is expected to gain significantly from last week’s Opec+ decision, as the country’s 2025 target level is about 8% higher than its target level for the end of 2024, analysts say.

“The country has received a higher required production level to reflect upstream investment capacity. That will give the UAE room to increase oil production next year, adding to the growth outlook for the economy,” Edward Bell, acting group head of research and chief economist, Emirates NBD, said in a note.

Several members of the Organisation of Petroleum Exporting Countries and their allies, collectively known as Opec+, including the UAE and Saudi Arabia, agreed to delay increasing oil production until the end of the first quarter next year, their third delay after plans to originally increase production in October and December ran up against unfavourable market conditions. The countries in Opec+ making these additional voluntary cuts will then phase their output back into the market from April next year until September 2026 and will still be producing below their official production quotas.

Morgan Stanley and HSBC revised down their expectations for an oil market surplus next year and forecast a Brent price of $70 per barrel, following the decision by OPEC+ to delay and slow plans for higher output.

Morgan Stanley raised its Brent forecast for the second half of 2025 to $70 from $66-68 per barrel, the bank said in a note on Thursday, Reuters reported.

The bank lowered its estimate for OPEC-9 (OPEC members minus Iran, Libya and Venezuela who are exempted from output curbs) production by 400,000 barrels per day (bpd) for 2025, and by 700,000 bpd by the fourth quarter of next year.

HSBC maintained its Brent crude price forecast at $70 per barrel for 2025 and beyond. It anticipates an oil market surplus of 0.2 million barrels per day in 2025 if OPEC+ proceeds with planned production hikes in April. Previously, it expected a surplus of 0.5 million bpd.

The move by OPEC+ to delay a revival of supply to April will pare global oil output next year, tightening balances somewhat, but a glut is still widely expected, according to banks and industry consultants.

“As per John Helms report, crude WTI December resistance levels are at $72.00 and $72.41, while support levels are at $68.12 and $67.91. Brent January resistance levels are at $73.33 and $74.28 while support is likely at $71.68 and $69.59,” said Vijay Valecha, Chief Investment Officer, Century Financial.

Also weighing on the oil market is the imminent return of US president-elect Donald Trump, who is known to be pro-oil. US oil production, already at record levels, may go up further is Trump wishes to raise output, which will be a further dampener on prices, anaylsts said.

Source

Khaleej Times