Analys
SEB – Råvarukommentarer, 28 september 2012
Sammanfattning av rekommendationer
Summan av resultatet blev vinst på 12%, efter förra veckans förlust på -1%.
Viktigast den här veckan är att vi tror att det kan komma en rekyl i guldpriset. Det ser ut så rent tekniskt. Priset har rusat iväg väldigt fort och är uppe på nivåer där det sannolikt finns många som vill ta hem vinster. Vi ser detta som en teknisk och kortsiktig rekyl. Vi anser att det finns gott om värde i Platina och väljer att ligga kvar köpta den, samtidigt som vi mycket kortsiktigt rekommenderar en kort position i guld. Råolja går vi över till neutral rekommendation på, liksom på silver, som ligger någonstans mellan guld och platina i vår vy nu.
Jordbruksprodukterna är vi neutrala till negativa till. Det kommer viktig lagerstatistik från USDA senare idag, som är värt att hålla koll på. Kaffe, socker och kakao ligger alla lågt i pris, och tycks bilda bottenformationer inför en eventuell trendvändning. För närvarande är vi neutrala.
Råolja – Brent
Det blev ingen omedelbar prisuppgång i Brentolja efter USAs tredje omgång av kvantitativa lättnader. Brentoljan faktiskt har fallit snarare än motsatsen. Den främsta orsaken till detta är på den ökande oron över situationen i Europa vilket resulterar i en starkare USD och en svagare euro. Medan Mellanösterns försörjningsavbrott och olösta situationen håller oljepriset sig högt men den grundläggande makrobilden ser svag ut och drar i baisseriktning. Vi har en neutral syn på Brentolja för närvarande till ett pris av $ 110 / b. Saudiarabien skulle gärna se att oljepriset blev lägre i syfte att lindra den globala makrosituationen men har inte lyckats hittills. Saudiarabien fortsätter dock att försöka hålla ner oljepriset genom att hålla sin oljeproduktion på en förhöjd nivå.
I nuläget förhåller vi oss neutral men ser nivåer kring 105 USD som en mycket attraktiv nivå för en lång position.
Elektricitet
Elmarknaden föll genom stödet, men vände sedan upp igen och ligger nu precis under motståndet. Den kortsiktiga trenden är nedåtriktad och vi ser uppgången som en rekyl. Ser vi till marknaden för kol, vars pris helt och hållet styr priset på el i Norden, är den marknaden i en tydlig nedåttrend sedan en topp i början på augusti. Däremot är priset på kol nere på en nivå, där priset funnit stöd flera gånger förut, i maj, juni och juli. Marknaden testar alltså historiska bottennivåer i såväl kol som el. Vi har ännu inte en köprekommendation, utan behåller neutral rekommendation.
Vidare kan nämnas att väderleksrapporten visar riklig nederbörd, reservoarerna är på 5-årshögsta och hydrobalansen är 12 till 15 TWh över det normala. Nordiska kärnkraftverk väntas vara helt online från den 26 oktober och global ekonomisk aktivitet minskar såväl i Asien som i Europa och är svag och oförutsägbar i USA. Detta gör att vi är oroliga för ytterligare nedsida i elpriset. Icke desto mindre, handlas kontraktet för det första kvartalets genomsnittliga spotpris för 2013, som är underliggande för våra ETN:er, nära 40 euro per MWh, som vi anser är ett bra pris inför vintern. Första kvartalet är trots allt det kallaste kvartalet. Det finns möjligheter till kortsiktiga uppgångar till 44 euro.
Guld och Silver
Efter den initiala reaktionen efter FED har guld och silver inte orkat klättra vidare. Många aktörer som köpt på förväntningar om ytterligare stimulanser har legat beredda att ta hem vinster. Det gamla ordspråket ”buy the rumour and sell the fact” verkar gälla även den här veckan. Undertonen är ändå stark och rekylerna endast marginella. Vi bedömer att priserna har fortsatt mer att ge med nivån $1800 inom räckhåll för guld (spot i London handlas kring $1862 i skrivandes stund). En tänkbar strategi (för den som inte redan köpt) är att bevaka den tidigare högsta nivån $1780 och agera på ett genombrott. Scenariot är likartat för silver med rekommenderad bevakning av förra veckans toppnivå på $35/oz ($34,50 i skrivandes stund). Vår tekniska analys indikerar en större rekyl på nedsidan om nivån 1748 bryts på stängningsbasis. Se våra tekniska kommentarer nedan:
Bankens tekniska analytiker menar så här: “Last Friday printed an up-thrust top, a false break higher. The move was on Monday followed by a gap higher and an immediate reversal creating a bearish engulfing/key day reversal candle. A break below 1752 will confirm at least a short term top formation (and more so breaking below the mid body pt, 1748, of the latest rising benchmark candle).” Dessutom ser man en divergens mellan den tekniska indikatorn stochastics, som ofta används som en överköpt/översåldindikator:
“There is a confirmed bear divergence between price and stochastic i.e. a higher top in price and a lower one in the indicator”. Vi ser en bild på detta nedan:
En annan teknisk indikator, MACD, visar på en överköpt marknad, som vi ser i nedanstående diagram, samtidigt som priset på guld ligger väldigt nära toppnivåerna från det första kvartalet.
Nedan ser vi lite längre historik för guld i dollar per troy ounce.
Nedan ser vi kursdiagrammet för silver i dollar per troy ounce, som ligger precis under 35 dollar. Vi har sett att det verkar finnas säljare på 35 dollar.
Platina
Trots strejkslutet vid Lonmins gruva i Sydafrika vände marknaden uppåt i veckan. Spotnoteringen i London är upp ca 1,5 % sen förra fredagen. Lonmin har finansiella problem och strejkvågen riskerar att sprida sig till andra platinagruvor. Flera guldgruvor har produktionsstopp p.g.a. nya strejker. Risken är stor för minskat utbud från regionen. Den industriella efterfrågan är relativt svag i Europa men fordonsindustrin i Kina förväntas skapa god tillväxt. Vi kvarstår med köprekommendationen.
Nedan ser vi priset på guld dividerat med priset på platina. Vi ser att guld har utvecklats sämre än platina sedan mitten avaugusti. Tekniskt ser den här trenden stark ut och har potential att gå från 1.05 till 1, dvs en outperformance på ytterligare 7%till platinas fördel. Som vi ser av den längre historiken brukar platina vara betydligt dyrare än guld. Dagens rabatt på platina iförhållande till guld är väldigt ovanlig.
Koppar
Prisutvecklingen har varit lite ”tråkig” för basmetallerna under veckan. Fokus har återigen skiftat tillbaka till Europa. Preliminära PMI- siffror från Eurozonen kom in lägre än väntat, 45,9 mot 46,3 förra månaden. IFO-Index (företagsklimatet) från Tyskland ingav inte heller något ökat förtroende. Ingen viktig statistik från Kina, men marknaden känner sig tveksam till aktiviteten där just nu. Det är egentligen bara US som faktiskt visar positiva tecken, på den för den amerikanska ekonomin så viktiga bostadsmarknaden, som nu verkar ha bottnat ur.
Basmetallerna handlades med blandad tendens under veckan. Koppar föll, aluminium och zink höll sig oförändrade, medan nickel visar styrka just nu och är upp 2 %.
När det gäller koppar, räknade vi med en stabilisering efter rekylen i förra veckan och därefter nya försök på uppsidan, men marknaden har inte haft kraft nog. Priset har istället fallit ca 1 %. Vi kvarstår med bedömningen att det mesta talar för en fortsatt stark underton. Den kan dock dröja lite till innan en ny rusning. Nya signaler från Kina är nog vad som behövs. Kina konsumerar 40 % av världens koppar.
Vi bedömer att finansiella aktörer som tidigare spekulerat i nedgång, nu har återköpt positioner. Tekniska fonder har börjat gå långa. Industrin är än så länge avvaktande och brottas med en prisuppgång som inte riktigt speglar den fundamentala situationen, och i många fall överstiger lagda budgetnivåer. Frågan är när (och om) industrin tvingas ”bita i det sura äpplet” och täcka in framtida behov. Centralbankerna visar att de menar allvar och stimulanserna fortsätter. Aktörerna väntar på mer från Kina. Mycket talar för en fortsatt stark trend i nästa vecka med test av nivåer upp mot $8500.
Vi väljer att på kort sikt rekommendera en lång position i koppar.
Kaffe
Kaffepriset har rekylerat ner från toppen tidigare i månaden, men funnit stöd vid 55 dagars glidande medelvärde. Tekniskt noterar vi att det efter bottennoteringen i juni på 148 cent, har en tid av konsolidering i marknaden bildat en triangelformation. Triangelformationer kan ofta signalera en trendvändning uppåt, som bekräftas av ett brott uppåt i så fall. Triangelformationen är ett observandum. Vi behåller en neutral rekommendation i väntan på brott uppåt – eller nedåt från formationen, som du kan se inritad i diagrammet nedan.
Socker
Marknaden för socker pressas av ideliga dåliga nyheter. Till exempel väntas nu det tredje året med överskott (lageruppbyggnad) pga hög produktion. Priset tycks dock inte ta mycket intryck av detta, utan håller det tekniska stödet, än så länge.
Kakao
Kakaopriset har fortsatt falla ner mot stödområdet. Vi behåller förra veckans neutrala rekommendation.
Stocks report idag från det amerikanska jordbruksdepartementet
Idag, fredag publicerar USDA stocksrapporten per den 1 september. Vi har sammanställt marknadens förväntningar från analytikers bidrag till Bloomberg och du ser dem i tabellen nedan:
För spannmål och övriga jordbruksprodukter hänvisas till gårdagens nyhetsbrev om jordruksprodukter.
[box]SEB Veckobrev Veckans råvarukommentar är producerat av SEB Merchant Banking och publiceras i samarbete och med tillstånd på Råvarumarknaden.se[/box]
Disclaimer
The information in this document has been compiled by SEB Merchant Banking, a division within Skandinaviska Enskilda Banken AB (publ) (“SEB”).
Opinions contained in this report represent the bank’s present opinion only and are subject to change without notice. All information contained in this report has been compiled in good faith from sources believed to be reliable. However, no representation or warranty, expressed or implied, is made with respect to the completeness or accuracy of its contents and the information is not to be relied upon as authoritative. Anyone considering taking actions based upon the content of this document is urged to base his or her investment decisions upon such investigations as he or she deems necessary. This document is being provided as information only, and no specific actions are being solicited as a result of it; to the extent permitted by law, no liability whatsoever is accepted for any direct or consequential loss arising from use of this document or its contents.
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Analys
The ”normal” oil price is USD 97/b

The Dated Brent crude oil price ydy closed at USD 96/b. Wow, that’s a high price! This sensation however depends on what you think is ”normal”. And normal in the eyes of most market participants today is USD 60/b. But this perception is probably largely based on the recent experience of the market. The average Brent crude oil price from 2015-2019 was USD 58.5/b. But that was a period of booming non-OPEC supply, mostly shale oil. But booming shale oil supply is now increasingly coming towards an end. Looking more broadly at the last 20 years the nominal average price was USD 75/b. But in inflation adjusted terms it was actually USD 97/b.

Saudi Arabia’s oil minister, Abdulaziz bin Salman, yesterday stated that its production cuts was not about driving the price up but instead it was preemptive versus the highly uncertain global economic development. In that respect it has a very good point. The US 2yr government bond rate has rallied to 5.06% which is the highest since 2006 and just a fraction away of being the highest since December 2000. The Chinese property market is struggling and global PMIs have been downhill since mid-2021 with many countries now at contractive, sub-50 level. Thus a deep concern for the health of the global economy and thus oil demand going forward is absolutely warranted. And thus the preemptive production cuts by Saudi Arabia. But killing the global economy off while it is wobbling with an oil price of USD 110-120/b or higher is of course not a smart thing to do either.
At the same conference in Canada yesterday the CEO of Aramco, Amin H. Nasser, said that he expected global oil demand to reach 110 m b/d in 2030 and that talk about a near term peak in global oil demand was ”driven by policies, rather than the proven combination of markets, competitive economics and technology” (Reuters).
With a demand outlook of 110 m b/d in 2030 the responsible thing to do is of course to make sure that the oil price stays at a level where investments are sufficient to cover both decline in existing production as well as future demand growth.
In terms of oil prices we tend to think about recent history and also in nominal terms. Most market participants are still mentally thinking of the oil prices we have experienced during the shale oil boom years from 2015-2019. The average nominal Brent crude price during that period was USD 58.5/b. This is today often perceived as ”the normal price”. But it was a very special period with booming non-OPEC supply whenever the WTI price moved above USD 45/b. But that period is increasingly behind us. While we could enjoy fairly low oil prices during this period it also left the world with a legacy: Subdued capex spending in upstream oil and gas all through these years. Then came the Covid-years which led to yet another trough in capex spending. We are soon talking close to 9 years of subdued capex spending.
If Amin H. Nasser is ballpark correct in his prediction that global oil demand will reach 110 m b/d in 2030 then the world should better get capex spending rolling. There is only one way to make that happen: a higher oil price. If the global economy now runs into an economic setback or recession and OPEC allows the oil price to drop to say USD 50/b, then we’d get yet another couple of years with subdued capex spending on top of the close to 9 years with subdued spending we already have behind us. So in the eyes of Saudi Arabia, Amin H. Nasser and Abdulaziz bin Salman, the responsible thing to do is to make sure that the oil price stays up at a sufficient level to ensure that capex spending stays up even during an economic downturn.
This brings us back to the question of what is a high oil price. We remember the shale oil boom years with an average nominal price of USD 58.5/b. We tend to think of it as the per definition ”normal” price. But we should instead think of it as the price depression period. A low-price period during which non-OPEC production boomed. Also, adjusting it for inflation, the real average price during this period was actually USD 72.2/b and not USD 58.5/b. If we however zoom out a little and look at the last 20 years then we get a nominal average of USD 75/b. The real, average inflation adjusted price over the past 20 years is however USD 97/b. The Dated Brent crude oil price yesterday closed at USD 96/b.
Worth noting however is that for such inflation adjustment to make sense then the assumed cost of production should actually rise along with inflation and as such create a ”rising floor price” to oil based on rising real costs. If costs in real terms instead are falling due to productivity improvements, then such inflation adjusted prices will have limited bearing for future prices. What matters more specifically is the development of real production costs for non-OPEC producers and the possibility to ramp up such production. Environmental politics in OECD countries is of course a clear limiting factor for non-OPEC oil production growth and possibly a much more important factor than the production cost it self.
But one last note on the fact that Saudi Arabia’s energy minister, Abdulaziz bin Salman, is emphasizing that the cuts are preemptive rather then an effort to drive the oil price to the sky while Amin H. Nasser is emphasizing that we need to be responsible. It means that if it turns out that the current cuts have indeed made the global oil market too tight with an oil price spiraling towards USD 110-120/b then we’ll highly likely see added supply from Saudi Arabia in November and December rather than Saudi sticking to 9.0 m b/d. This limits the risk for a continued unchecked price rally to such levels.
Oil price perspectives. We tend to think that the nominal average Brent crude oil price of USD 58.5/b during the shale oil boom years from 2015-19 is per definition the ”normal” price. But that period is now increasingly behind us. Zoom out a little to the real, average, inflation adjusted price of the past 20 years and we get USD 97/b. In mathematical terms it is much more ”normal” than the nominal price during the shale oil boom years

Is global oil demand about to peak 1: OECD and non-OECD share of global population

Is global oil demand about to peak 2: Oil demand per capita per year

Analys
USD 100/b in sight but oil product demand may start to hurt

Some crude oil grades have already traded above USD 100/b. Tapis last week at USD 101.3/b. Dated Brent is trading at USD 95.1/b. No more than some market noise is needed to drive it above USD 100/b. But a perceived and implied oil market deficit of 1.5 to 2.5 m b/d may be closer to balance than a deficit. And if so the reason is probably that oil product demand is hurting. Refineries are running hard. They are craving for crude and converting it to oil products. Crude stocks in US, EU16 and Japan fell 23 m b in August as a result of this and amid continued restraint production by Saudi/Russia. But oil product stocks rose 20.3 m b with net draws in crude and products of only 2.7 m b for these regions. Thus indicating more of a balanced market than a deficit. Naturally there has been strong support for crude prices while oil product refinery margins have started to come off. Saudi/Russia is in solid control of the market. Both crude and product stocks are low while the market is either in deficit or at best in balance. So there should be limited down side price risk. But oil product demand is likely to hurt more if Brent crude rises to USD 110-120/b and such a price level looks excessive.

Crude oil prices have been on a relentless rise since late June when it became clear that Saudi Arabia would keep its production at 9 m b/d not just in July but also in August. Then later extended to September and then lately to the end of the year. On paper this has placed the market into a solid deficit. Total OPEC production was 27.8 m b/d in August and likely more or less the same in September. OPEC estimates that the need for oil from OPEC in Q3-23 is 29.2 m b/d which places the global market in a 1.4 m b/d deficit when OPEC produces 27.8 m b/d.
The proof of the pudding is of course that inventories actually draws down when there is a deficit. A 1.4 m b/d of deficit for 31 days in August implies a global inventory draw of 43.4 m b/d. If we assume that OECD countries accounts for 46% of global oil demand then OECD could/should have had a fair share of inventory rise of say 20 m b in August. Actual inventory data are however usually a lagging set of data so we have to work with sub sets of data being released on a higher frequency. And non-OECD demand and inventory data are hard to come by.
If we look at oil inventory data for US, EU16 and Japan we see that crude stocks fell 23 m b in August while product stocks rose 20.3 m b with a total crude and product draw of only 2.7 m b. I.e. indicating close to a balanced market in August rather than a big deficit. But it matters that crude stocks fell 23 m b. That is a tight crude market where refineries are craving and bidding for crude oil together with speculators who are buying paper-oil. So refineries worked hard to buy crude oil and converting it to oil products in August. But these additional oil products weren’t gobbled up by consumers but instead went into inventories.
Rising oil product inventories is of course a good thing since these inventories in general are low. And also oil product stocks are low. The point is more that the world did maybe not run a large supply/demand deficit of 1.5 to 2.5 m b/d in August but rather had a more balanced market. A weaker oil product demand than anticipated would then likely be the natural explanation for this. Strong refinery demand for crude oil, crude oil inventory draws amid a situation where crude inventories already are low is of course creating an added sense of bullishness for crude oil.
On the one hand strong refinery demand for crude oil has helped to drive crude oil prices higher amid continued production cuts by Saudi Arabia. Rising oil product stocks have on the other hand eased the pressure on oil products and thus softened the oil product refinery margins.
The overall situation is that Saudi Arabia together with Russia are in solid control of the oil market. Further that the global market is either balanced or in deficit and that both crude and product stocks are still low. Thus we have a tight market both in terms of supplies and inventories. So there should be limited downside in oil prices. We are highly likely to see Dated Brent moving above USD 100/b. It is now less than USD 5/b away from that level and only noise is needed to bring it above. Tupis crude oil in Asia traded at USD 101.3/b last week. So some crude benchmarks are already above the USD 100/b mark.
While Dated Brent looks set to hit USD 100/b in not too long we are skeptical with respect to further price rises to USD 110-120/b as oil product demand likely increasingly would start to hurt. Unless of course if we get some serious supply disruptions. But Saudi Arabia now has several million barrels per day of reserve capacity as it today only produces 9.0 m b/d. Thus disruptions can be countered. Oil product demand, oil product cracks and oil product inventories is a good thing to watch going forward. An oil price of USD 85-95/b is probably much better than USD 110-120/b for a world where economic activity is likely set to slow rather than accelerate following large interest rate hikes over the past 12-18 months.
OPEC’s implied call-on-OPEC crude oil. If OPEC’s production stays at 27.8 m b/d throughout Q3-23 and Q4-23 then OPECs numbers further strong inventory draws to the end of the year.

Net long speculative positions in Brent crude and WTI. Speculators have joined the price rally since end of June.

End of month crude and product stocks in m b in EU16, US and Japan. Solid draw in crude stocks but also solid rise in product stocks. In total very limited inventory draw. Refineries ran hard to convert crude to oil products but these then went straight into inventories alleviating low oil product inventories there.

ARA oil product refinery margins have come off their highs for all products as the oil product situation has eased a bit. Especially so for gasoline with now fading summer driving. But also HFO 3.5% cracks have eased back a little bit. But to be clear, diesel cracks and mid-dist cracks are still exceptionally high. And even gasoline crack down to USD 17.6/b is still very high this time of year.

ARA diesel cracks in USD/b. Very, very high in 2022. Almost normal in Apr and May. Now very high vs. normal though a little softer than last year.

US crude and product stocks vs. 2015-2019 average. Still very low mid-dist inventories (diesel) and also low crude stocks but not all that low gasoline inventories.

US crude and product stocks vs. 2015-2019 averages. Mid-dist stocks have stayed persistently low while gasoline stocks suddenly have jumped as gasoline demand seems to have started to hurt due to higher prices.

Total commercial US crude and product stocks in million barrels. Rising lately. If large, global deficit they should have been falling sharply. Might be a blip?

Source: SEB graph and calculations, Blbrg data feed, EIA data
Analys
USD 85/b or USD 110/b is up to Saudi/Russia to decide

The market is bewildered and cannot quite figure out whether the latest extension of Saudi Arabia’s unilateral cut to the end of the year is 1) A reflection of weakness to come and an effort to preemptively trying to avoid the oil price from falling below USD 85/b amid coming weakness, or 2) An effort do drive the oil price to USD 100-110/b by the end of the year. If the IEA’s latest calculations for global demand in Q3 and Q4 are correct and Saudi sticks to its cuts then global inventories will indeed decline by 250 million barrels by year end and Brent crude will rally to USD 100-110/b. And Saudi Arabia will get a lot of blame. One thing which is very clear though is that Saudi Arabia together with Russia is in comfortable control of the oil market and we’ll just have to accept the oil price they are aiming for.

OPEC produced 27.8 m b/d in August. The IEA in its latest OMR has calculated call-on-OPEC to be 30 m b/d in Q3-23 and 29.8 m b/d in Q4-23. So on paper the global market is running a deficit of 2.2 m b/d or 15.4 m b per week. If so we should see a decline in US oil inventories as they are impacted by the global balance. Maybe on par with US oil demand share of the world being close to 20%. I.e. we should expect to see an inventory decline in the US of at least 3 m b per week. Maybe more. And indeed that is also what we have seen. Ydy the US API released partial US inventory data indicating that US crude inventories declined 5.5 m b last week while gasoline inventories declined 5.1 m b. That is big and a clear signal that the market today is running at a significant deficit. Other signs of a tight market is the elevated level of backwardation in crude and oil product forward curves, rising official selling prices by Saudi and also the fact that Dubai crude is trading at a premium of close to USD 1/b versus Brent crude rather than the usual discount of USD 1-2-3/b.
In this perspective the extension of Saudi Arabia’s unilateral production cut to the end of the year is shocking. If the IEA is correct in its assessments then we would get a global inventory draw of about 250 million barrels from now to the end of the year. And if so the Brent crude oil price would indeed move to USD 100 – 110/b by the end of the year. Speculators can then doubt the market as much as they want. But such a physical deficit would most definitely drive the price up, up, up.
This deliberate action of driving the oil price to USD 100 – 110/b can then squarely be blamed on Saudi Arabia’s unilateral production cuts. Together with Russian export curbs of 0.3 m b/d of course. Everyone can accept that the oil price rallies to USD 100/b and higher due to unforeseen events. But here we are talking about deliberate action of driving the oil price higher in the face of a western world fighting hard to curb inflation while the Biden administration is also preparing for a re-election in 2024. Gasoline prices higher and higher. Hm, that is not at all what the US consumers wants, what Biden wants or what the Fed wants. So the latest action from Saudi Arabia, if it drives the oil price to USD 100/b or higher must indeed lead to political heat from the US.
But there is a possible excuse. We know that interest rates have been lifted rapidly over the past 12-18 months and that this is leading to global economic cooling for the year to come. Add China’s struggling housing market to this. Western consumers are buying less stuff from China. Chinese consumers are buying less stuff because they fear the economic situation. Chinese exports are down 8.8% YoY and imports are down 7.3% YoY.
Saudi Arabia has one of the biggest physical oil books in the world. As such it can see the cards of its oil purchasing clients on a 1-2-3 months forward basis. It can see what they are booking and ordering for the coming 1-2-3 months. IEA’s calculations is the global balance on paper. It is a static snapshot. But the world is dynamic and changing all the time. So it is possible that the extension of Saudi Arabia’s unilateral cut is a counter to weakness to come and an effort to avoid the oil price from falling below USD 85/b rather than an effort to drive the oil price to USD 100/b or higher. It is impossible to know for sure. What we can be pretty confident about however is that Saudi Arabia together with Russia are comfortably running the show.
Another twist here is also that even if Saudi Arabia now has pledged to keep its production at 9 m b/d (vs. normal 10 m b/d) to end of December, it always has the option to change the course in October and November. I.e. if it turns out that the cuts are too deep and the market is overly short oil, then it can lift production November and December if need be.
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