Morningstar analysts noted that, on a quarterly basis, oil prices look weak. The analysts revealed in the report that they expect “continued weakness, with $65-$70 a barrel (WTI) a likely possibility in 2024, if not lower”. “We see the OPEC+ production cut extensions as a sign of weakness, not strength. Most of the extension deadlines were pushed back a year to the end of 2025,” the analysts added in the report. “Further, Saudi Arabia just sold $11 billion in stock in state-run Aramco, indicating both its need for cash to fund Vision 2030 efforts and its inability to defend oil prices,” they went on to state. In the report, the analysts said OPEC’s “complex meeting outcome from June 2 should not obscure our view that it still operates from a position of weakness in an oversupplied market”. The analysts highlighted in the report that the group has three separate cuts in progress, totaling 5.86 million barrels per day. “A groupwide cut of about two million barrels per day was originally set to expire at the end of 2024 but was extended to the end of 2025,” they pointed out. “Similarly, a 1.7 million barrels per day voluntary cut by certain members was also extended to the end of 2025, from the end of 2024. Finally, a second 2.2 million barrels per day voluntary cut by certain members was extended in full for another quarter. It was initially due to expire at the end of June, before gradually being phased out by September 2025,” they added. “Importantly, OPEC’s announcement signaled that the monthly increases phasing out the production cut can be ‘paused or reversed subject to market conditions’. In other words, we could see the 2.2 million barrels per day reversal placed on hold, if the market remains oversupplied,” they went on to state. The Morningstar analysts said in the report that the extensions look “particularly weak when OPEC is assuming about 2.25 million barrels per day of oil demand growth in 2024, while the International Energy Agency is less than half of that at 1.06 million barrels per day”. “Further, the IEA and EIA have been cutting demand growth forecasts for 2024, while OPEC’s forecast remains unchanged since the start of 2024,” they added. “In other words, OPEC’s own demand forecast looks potentially stale and even if OPEC believes it remains accurate, it has now been undercut by the extensions of production cuts,” they continued. “If OPEC really expects consumption growth will exceed two million barrels per day there wouldn’t be a strong case to extend supply cuts,” the analysts went on to note. In a report sent to Rigzone by the Macquarie team on Wednesday, Macquarie strategists revealed that they are “structurally bearish [on] crude oil”. The strategists outlined in the report that a summer rally is possible but warned that the market “may look past it” and that “draws could disappoint”. They also warned that surpluses in the second half of 2024 and 2025 create a risk of a “large price correction”. In the report, the strategists outlined that positive price drivers include geopolitics, adding that supply risk is low but not zero and that a Trump election could re-introduce Russia supply risk. The potential for another unusually hot summer and the possibility of cyclical demand upside emerging next year were also touted as positive price drivers. Highlighting negative price drivers in the report, the strategists flagged the “OPEC+ decision and falling compliance”, as well as “U.S. election year tactics” and “continuing non-OPEC growth, U.S. and elsewhere, through 2025”. The strategists also flagged China demand being “less sensitive to economic growth, esp. diesel” as a negative price driver in the report. NN: The coming war will give us $150 Brent.