Analys
It’s artificial, but is still real and prices will tick higher

Donald’s tweet on Friday that the OPEC cartel is keeping oil prices artificially high sent Brent crude down to an intraday low of $72.88/bl. The market later in the day totally disregarded the tweet sending Brent to its highest close of the week at $74.06/bl, up $0.4/bl on the day, +2% w/w and the highest close since November 2014. Of course Donald is totally right. The market is artificially tight because the OPEC+ cartel has deliberately cut production. In total its production is down 1.7 m bl/d versus Oct 2016. In our view there were deliberate cuts of 2,052 k bl/d in February if we cut out involuntary cuts of 810 k bl/d and production gains of 1,146 k bl/d. Of course Donald is right that it is the OPEC+ cartel which is driving the market. Tell us something new! That has been the case since their decision in October 2016. Of course the cartel has been lucky since their strategy has been supported by synchronised global growth and very strong oil demand growth as well as production in Venezuela falling like a rock. If it had not been for the very strong global oil demand growth their strategy would probably have been very close to failure since US crude oil production is reviving so strongly. In our estimate they will not be able to exit their cuts in 2019 without driving global inventories back up again. That is why an extension of their agreement to 2019 is on the agenda for the meeting in Vienna on June 20/21/22. So the market is artificially tight but it is the oil market reality of today. They are cutting, oil demand is strong, inventories are going down and prices are moving higher. The OPEC+ cartel will in our view be in control of the market in 2019 unless we have a global recession. They can put some of their cuts back into the market, but not all. Any involuntary production cuts by Venezuela, Libya, Mexico or possibly Iran will of course be welcomed by the deliberate cutters in the group.
If it had not been for cuts by the OPEC+ cartel since January 2017 we would probably have had an oil price still somewhere around $50-55/b
Since a 2017 high of 3059.7 in May 2017 the commercial OECD oil inventories have declined 218 million barrels which equals a 0.8 m bl/d daily draw down on average through the period. On average through that period the production of OPEC+ has been 1.4 m bl/d below its October 2016 production level in a mix of deliberate cuts, gains and involuntary cuts. Since the world is bigger than the OECD inventories there has probably been some inventory draws in non-OECD stocks as well. So while the OECD drawdown implied global deficit since May 2017 is 0.8 m bl/d the actual deficit may have been higher, but probably not higher than the net effective cuts of OPEC+ of 1.4 m bl/d over the same period. So yes, our view sides with Donald Trump that if it had not been for cuts by the OPEC+ cartel since January 2017 we would probably have had an oil price still somewhere around $50-55/b or even maybe sub-$50/bl.
There have however hardly been any negative responses to the OPEC+ cartel’s actions up until now on Friday with the tweet by Donald Trump. Not even Donald has acted before now even though production cuts have been going on since the start of 2017. Mostly the action by the cartel has been viewed positively across the board. I cannot remember to have seen any negative takes on it before now. Mostly the take has been that OPEC+ has been doing the world a favour.
OPEC+ has driven the global oil sector out of its investment hysteresis and out of its deep, dark abyss of despair and back into action
Through its cuts, inventory draws and higher prices OPEC+ has driven the global oil sector out of its investment hysteresis and out of its deep, dark abyss of despair and back into action. That is probably a good thing since it will help to reduce the risk for a significant undershoot in supply down the road due to the deep investment cuts in new conventional supply since 2014. And the jury is still out whether we will be able to dodge that bullet when the pipeline of legacy green field conventional oil investments from before 2014 starts to run dry in 2020. Our view is that there is clearly upside price risk due to this on this time horizon.
For the time being we remain bullish for Brent crude oil prices as OPEC+ cuts are intact, their agreement will and must be extended to 2019 at their June 20/21/22 in order to avoid raising inventories in 2019. For the rest of 2018 we expect inventories do draw lower with added supply risk due to Venezuela, Libya and possibly Iran.
If Donald wants to do something he can sign the sanction waivers on May 12 in order to safeguard Iranian crude oil supply. Else his dear voters and consumers are likely to face higher gasoline prices this summer.
Ch1: OPEC+ deliberate cuts, involuntary cuts and gains
Ch2: OPEC+showing who are doing what versus October 2018
C3: Crude and product weekly inventory data versus start of year. Heading lower. Down 23 m bl last week
Analys
OPEC+ in a process of retaking market share

Oil prices are likely to fall for a fourth straight year as OPEC+ unwinds cuts and retakes market share. We expect Brent crude to average USD 55/b in Q4/25 before OPEC+ steps in to stabilise the market into 2026. Surplus, stock building, oil prices are under pressure with OPEC+ calling the shots as to how rough it wants to play it. We see natural gas prices following parity with oil (except for seasonality) until LNG surplus arrives in late 2026/early 2027.

Oil market: Q4/25 and 2026 will be all about how OPEC+ chooses to play it
OPEC+ is in a process of unwinding voluntary cuts by a sub-group of the members and taking back market share. But the process looks set to be different from 2014-16, as the group doesn’t look likely to blindly lift production to take back market share. The group has stated very explicitly that it can just as well cut production as increase it ahead. While the oil price is unlikely to drop as violently and lasting as in 2014-16, it will likely fall further before the group steps in with fresh cuts to stabilise the price. We expect Brent to fall to USD 55/b in Q4/25 before the group steps in with fresh cuts at the end of the year.

Natural gas market: Winter risk ahead, yet LNG balance to loosen from 2026
The global gas market entered 2025 in a fragile state of balance. European reliance on LNG remains high, with Russian pipeline flows limited to Turkey and Russian LNG constrained by sanctions. Planned NCS maintenance in late summer could trim exports by up to 1.3 TWh/day, pressuring EU storage ahead of winter. Meanwhile, NE Asia accounts for more than 50% of global LNG demand, with China alone nearing a 20% share (~80 mt in 2024). US shale gas production has likely peaked after reaching 104.8 bcf/d, even as LNG export capacity expands rapidly, tightening the US balance. Global supply additions are limited until late 2026, when major US, Qatari and Canadian projects are due to start up. Until then, we expect TTF to average EUR 38/MWh through 2025, before easing as the new supply wave likely arrives in late 2026 and then in 2027.
Analys
Manufacturing PMIs ticking higher lends support to both copper and oil

Price action contained withing USD 2/b last week. Likely muted today as well with US closed. The Brent November contract is the new front-month contract as of today. It traded in a range of USD 66.37-68.49/b and closed the week up a mere 0.4% at USD 67.48/b. US oil inventory data didn’t make much of an impact on the Brent price last week as it is totally normal for US crude stocks to decline 2.4 mb/d this time of year as data showed. This morning Brent is up a meager 0.5% to USD 67.8/b. It is US Labor day today with US markets closed. Today’s price action is likely going to be muted due to that.

Improving manufacturing readings. China’s manufacturing PMI for August came in at 49.4 versus 49.3 for July. A marginal improvement. The total PMI index ticked up to 50.5 from 50.2 with non-manufacturing also helping it higher. The HCOB Eurozone manufacturing PMI was a disastrous 45.1 last December, but has since then been on a one-way street upwards to its current 50.5 for August. The S&P US manufacturing index jumped to 53.3 in August which was the highest since 2022 (US ISM manufacturing tomorrow). India manufacturing PMI rose further and to 59.3 for August which is the highest since at least 2022.
Are we in for global manufacturing expansion? Would help to explain copper at 10k and resilient oil. JPMorgan global manufacturing index for August is due tomorrow. It was 49.7 in July and has been below the 50-line since February. Looking at the above it looks like a good chance for moving into positive territory for global manufacturing. A copper price of USD 9935/ton, sniffing at the 10k line could be a reflection of that. An oil price holding up fairly well at close to USD 68/b despite the fact that oil balances for Q4-25 and 2026 looks bloated could be another reflection that global manufacturing may be accelerating.
US manufacturing PMI by S&P rose to 53.3 in August. It was published on 21 August, so not at all newly released. But the US ISM manufacturing PMI is due tomorrow and has the potential to follow suite with a strong manufacturing reading.

Analys
Crude stocks fall again – diesel tightness persists

U.S. commercial crude inventories posted another draw last week, falling by 2.4 million barrels to 418.3 million barrels, according to the latest DOE report. Inventories are now 6% below the five-year seasonal average, underlining a persistently tight supply picture as we move into the post-peak demand season.

While the draw was smaller than last week’s 6 million barrel decline, the trend remains consistent with seasonal patterns. Current inventories are still well below the 2015–2022 average of around 449 million barrels.
Gasoline inventories dropped by 1.2 million barrels and are now close to the five-year average. The breakdown showed a modest increase in finished gasoline offset by a decline in blending components – hinting at steady end-user demand.
Diesel inventories saw yet another sharp move, falling by 1.8 million barrels. Stocks are now 15% below the five-year average, pointing to sustained tightness in middle distillates. In fact, diesel remains the most undersupplied segment, with current inventory levels at the very low end of the historical range (see page 3 attached).
Total commercial petroleum inventories – including crude and products but excluding the SPR – fell by 4.4 million barrels on the week, bringing total inventories to approximately 1,259 million barrels. Despite rising refinery utilization at 94.6%, the broader inventory complex remains structurally tight.
On the demand side, the DOE’s ‘products supplied’ metric – a proxy for implied consumption – stayed strong. Total product demand averaged 21.2 million barrels per day over the last four weeks, up 2.5% YoY. Diesel and jet fuel were the standouts, up 7.7% and 1.7%, respectively, while gasoline demand softened slightly, down 1.1% YoY. The figures reflect a still-solid late-summer demand environment, particularly in industrial and freight-related sectors.


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