Saudi Output Cut Not to Help Increase Oil Prices

Top crude exporter Saudi Arabia's 1 million barrel per day oil output cut is not expected to underpin a "sustainable price increase" into the high $80s-low $90s with weak fundamentals pointing to lower prices by the yearend, Citi analysts said in a note on Tuesday.
Brent gained as much as $2.60 on Monday after Saudi Arabia, OPEC's de facto leader, said its output would drop by 1 million bpd to 9 million bpd in July, Reuters reported.
However, oil prices came off those gains to edge lower on Tuesday.
"We see average quarterly prices fairly range-bound for the year, averaging $81 for Brent in both H1 and H2 but with the potential to range between $72 and $90," Citi said in the note.
Citi analysts cited factors such as weaker demand and stronger non-OPEC supply by the yearend, potential recessions in the US and Europe, and lower growth in China, which could see prices end up lower rather than higher this year and in 2024.
OPEC+, which groups the Organization of Petroleum Exporting Countries and allies led by Russia, currently has cuts of 3.66 million bpd in place, amounting to 3.6% of global demand, to limit supply into 2024 as the group seeks to boost flagging oil prices.
But "it would take surprisingly better coordinated action among OPEC+ producers to tighten markets ... The likelihood that Saudi Arabia would tackle this on its own on a sustained basis is quite low," Citi said.