OPEC earlier aimed to restore a total of 2.2 million barrels a day in monthly increments, starting in April. But can they refrain from bringing this supply online the 4th time? We don’t think so. We believe the Achilles heel of OPEC is market share and not crude prices anymore. In case of a further delay, other prevalent conditions imply they lose both markets share as well as lower prices. In case of restoration, at least they stand to gain the market share even if they loose on price for the time being. Technically brent prices are headed to 60 if it breaks 70 levels on weekly closing basis & we believe it’s a matter of when and not if. US-Russia talks have moved rapidly, raising prospects for faster resolution of the Russia-Ukraine war, and loosening of oil/gas markets. A Russia-Ukraine resolution could lead to higher crude and product supply availability, as well as lower tonne-miles in waterborne tanker shipments which would be bearish for oil markets. President Trump has also remarked on cutting taxes “substantially” for oil/gas producers along with the push for 100% capex expensing. Till now Iran's Ayatollah Khamenei has sounded a tough nut to crack but the domestic economic and political pressure in Iran continues to rise, as its currency has weakened dramatically, youth unemployment is high, amid power shortages. How long can Iran resist the call for a deal under these circumstances. Even Iraq/KRG supply could come also back soon. Iraq’s oil minister said last week that oil exports from the semi-autonomous Kurdish region could resume within a week, which could add up to 0.1-m b/d of supply back to market. In summary, OPEC is facing loosing more market share if it delays further the roll back of output cuts. That's the Achilles Heel for OPEC. Solution lies in accepting that oil prices need to fall significantly lower for once to weed out the US shale and other new non OPEC producers. Hence we take a contrarion call and believe that OPEC will roll back the output cut as planned in it's early March meeting.
