Hedge fund giant Citadel said that the global oil market will fall into an "extremely tight" situation in the second half of the year, and if OPEC+ does not restore more supply, oil prices will rise to a level that will eventually limit demand.
Citadel won the title of hedge fund performance champion twice in 2022-2023, successfully replacing Bridgewater Fund and becoming the "new king" of hedge funds. It earned more than $4 billion in profits in commodity trading business last year.
OPEC+ “has regained control of the oil market,” Sebastian Barrack, the firm’s head of commodities, said at the Financial Times Commodities Global Summit in Lausanne, Switzerland, on Monday. He said this meant that supply from its members “will determine the direction of oil prices over the next 12 months.”
Barak's comments came after international benchmark Brent crude prices last week breached $90 a barrel for the first time since October, driven by concerns over deepening conflict in the Middle East.
Brent crude fell more than 1% on Monday after Israel announced it had withdrawn its troops from Khan Yunis in southern Gaza, easing concerns about an escalation of the conflict, but is still up about 16% this year, while the U.S. benchmark WTI crude is up about 20%.
Barak said OPEC+’s position was strengthened by the “discipline” shown by producers such as the United States, which chose not to take advantage of high oil prices to boost production.
He added that if OPEC+ does not release spare supply, then "we are going to see some degree of tightness in oil supply and ultimately high oil prices will destroy demand to account for the high oil prices."
Despite strong opposition from the United States, in order to boost oil prices amid sluggish global demand, OPEC+ has extended its voluntary production cuts from November 2022. These production cuts have resulted in a reduction of about 5.3 million barrels per day in global crude oil production, accounting for about 5% of global supply.
Saudi Arabia has taken the lead in the move because it needs high oil prices to pay for its massive spending plans, such as new cities or soccer projects. But in cutting output, OPEC+ is also ceding market share to non-member producers, particularly the United States and Canada.
Some analysts have noted that if oil prices rise above $100 a barrel, OPEC+ will ease production curbs to avoid further erosion of its market share.
Barak warned that potential changes in the organization's production policy could lead to "abnormal" fluctuations in the oil market. In the case that OPEC+ remains on hold to continue tightening the market, oil prices will rise further. On the other hand, if OPEC+ misjudges the timing and scale of supply release, "oil prices could be $30 lower than they are now."
The article is forwarded from: Jinshi Data
