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“Everything is valuable”, how much impact will OPEC's production cuts have?

The energy game continues. After the OPEC+ meeting, the price of US oil futures once rose to 88 US dollars/barrel on Thursday, and the price of crude oil futures also rose to 94 US dollars/barrel. The cumulative increase this week was around 10%. At this meeting, OPEC+ will cut production by 2 million b/d from November 2022 based on the August 2022 production plan. This is the biggest reduction in production since the outbreak in early 2020, equivalent to about 2% of global oil demand, and the validity period may be extended until December 31, 2023. Judging from the data provided by OPEC+, OPEC member countries may cut production by 1,273 million b/d, from the August production plan of 26.689 million b/d to 25.416 million b/d; non-OPEC member countries may cut production by 727,000 b/d, from the August production plan of 17.167,000 b/d to 16.44 million b/d, as shown in the chart below. In fact, due to the slow pace of development of projects after the pandemic, the actual production of many member countries may not have reached the level of production plans, so although the extent of production cuts seems astonishing, the actual results may not be the case, the impact may be mainly on an ideological level — the signals released by the OPEC+ meeting are disrupting capital markets and investment sentiment. How big is the impact The background of this conference includes: 1) oil prices have fallen by nearly 30% from a mid-year high; 2) Europe, which has fallen into an energy crisis, “Winter has arrived”; 3) the US midterm elections are not far away, and under political and economic pressure from inflation, or...
The energy game continues.
After the OPEC+ meeting, the price of US oil futures once rose to 88 US dollars/barrel on Thursday, and the price of crude oil futures also rose to 94 US dollars/barrel. The cumulative increase this week was around 10%.
At this meeting, OPEC+ will cut production by 2 million b/d from November 2022 based on the August 2022 production plan. This is the biggest reduction in production since the outbreak in early 2020, equivalent to about 2% of global oil demand, and the validity period may be extended until December 31, 2023.
Judging from the data provided by OPEC+, OPEC member countries may cut production by 1,273 million b/d, from the August production plan of 26.689 million b/d to 25.416 million b/d; non-OPEC member countries may cut production by 727,000 b/d, from the August production plan of 17.167,000 b/d to 16.44 million b/d, as shown in the chart below.
The energy game continues. After the OPEC+ meeting, the price of US oil futures once rose to 88 US dollars/barrel on Thursday, and the price of crude oil futures also rose to 94 US dollars/barrel. The cumulative increase this week was around 10%. At this meeting, OPEC+ will cut production by 2 million b/d from November 2022 based on the August 2022 production plan. This is the biggest reduction in production since the outbreak in early 2020, equivalent to about 2% of global oil demand, and the validity period may be extended until December 31, 2023. Judging from the data provided by OPEC+, OPEC member countries may cut production by 1,273 million b/d, from the August production plan of 26.689 million b/d to 25.416 million b/d; non-OPEC member countries may cut production by 727,000 b/d, from the August production plan of 17.167,000 b/d to 16.44 million b/d, as shown in the chart below. In fact, due to the slow pace of development of projects after the pandemic, the actual production of many member countries may not have reached the level of production plans, so although the extent of production cuts seems astonishing, the actual results may not be the case, the impact may be mainly on an ideological level — the signals released by the OPEC+ meeting are disrupting capital markets and investment sentiment. How big is the impact The background of this conference includes: 1) oil prices have fallen by nearly 30% from a mid-year high; 2) Europe, which has fallen into an energy crisis, “Winter has arrived”; 3) the US midterm elections are not far away, and under political and economic pressure from inflation, or...
In fact, due to the slow pace of development of projects after the pandemic, the actual production of many member countries may not have reached the level of production plans, so although the extent of production cuts seems astonishing, the actual results may not be the case, the impact may be mainly on an ideological level — the signals released by the OPEC+ meeting are disrupting capital markets and investment sentiment.
How big is the impact
The background of this meeting includes: 1) oil prices have fallen by nearly 30% from a mid-year high; 2) the “winter has arrived” in Europe, which has fallen into an energy crisis; 3) the US midterm elections are not far away, and political and economic pressure may increase under inflation; 4) the US and Europe may set limits on Russian oil export prices.
“Everything has a price (everything has a price)” and “energy security has a price as well (energy security has a price as well),” the OPEC Secretary General stated at the regular monthly meeting held in Vienna on October 5, 2022.
You're stressed, and so am I.
Inflationary pressure in Europe and the US was caused by a shortage of supply, but the pressure on OPEC+ earnings was increased by expectations of a slowdown in the global economy.
Who is the winner in the energy game? Probably Buffett.
A few hours after OPEC+ announced plans to cut production, the US announced that it would release another 10 million barrels of strategic oil reserves (SPR) in November to withstand pressure from rising oil prices.
As early as March, the US has begun releasing 10 million barrels of strategic reserves every day to curb high oil prices.
In the week ending September 30, 2022, U.S. crude oil inventories excluding strategic oil reserves were 429 million barrels, down 1.356 million barrels from last week; crude oil inventories, including strategic oil reserves, were 846 million barrels, down 7.55 million barrels from last week, as shown in the chart below.
The energy game continues. After the OPEC+ meeting, the price of US oil futures once rose to 88 US dollars/barrel on Thursday, and the price of crude oil futures also rose to 94 US dollars/barrel. The cumulative increase this week was around 10%. At this meeting, OPEC+ will cut production by 2 million b/d from November 2022 based on the August 2022 production plan. This is the biggest reduction in production since the outbreak in early 2020, equivalent to about 2% of global oil demand, and the validity period may be extended until December 31, 2023. Judging from the data provided by OPEC+, OPEC member countries may cut production by 1,273 million b/d, from the August production plan of 26.689 million b/d to 25.416 million b/d; non-OPEC member countries may cut production by 727,000 b/d, from the August production plan of 17.167,000 b/d to 16.44 million b/d, as shown in the chart below. In fact, due to the slow pace of development of projects after the pandemic, the actual production of many member countries may not have reached the level of production plans, so although the extent of production cuts seems astonishing, the actual results may not be the case, the impact may be mainly on an ideological level — the signals released by the OPEC+ meeting are disrupting capital markets and investment sentiment. How big is the impact The background of this conference includes: 1) oil prices have fallen by nearly 30% from a mid-year high; 2) Europe, which has fallen into an energy crisis, “Winter has arrived”; 3) the US midterm elections are not far away, and under political and economic pressure from inflation, or...
As can be seen from the chart, U.S. crude oil inventories, excluding strategic reserves, rose slightly when crude oil futures prices plummeted in 2020, mainly because many countries took advantage of low oil prices to hoard strategic reserves. However, judging from the sharp decline in crude oil inventories, including strategic reserves, in recent weeks, and the decline is far higher than that of crude oil inventories excluding strategic reserves, consumption of strategic reserves surged after the release of strategic reserves.
As shown in the chart below, the US strategic oil reserves estimated from two data have declined markedly in recent weeks.
The energy game continues. After the OPEC+ meeting, the price of US oil futures once rose to 88 US dollars/barrel on Thursday, and the price of crude oil futures also rose to 94 US dollars/barrel. The cumulative increase this week was around 10%. At this meeting, OPEC+ will cut production by 2 million b/d from November 2022 based on the August 2022 production plan. This is the biggest reduction in production since the outbreak in early 2020, equivalent to about 2% of global oil demand, and the validity period may be extended until December 31, 2023. Judging from the data provided by OPEC+, OPEC member countries may cut production by 1,273 million b/d, from the August production plan of 26.689 million b/d to 25.416 million b/d; non-OPEC member countries may cut production by 727,000 b/d, from the August production plan of 17.167,000 b/d to 16.44 million b/d, as shown in the chart below. In fact, due to the slow pace of development of projects after the pandemic, the actual production of many member countries may not have reached the level of production plans, so although the extent of production cuts seems astonishing, the actual results may not be the case, the impact may be mainly on an ideological level — the signals released by the OPEC+ meeting are disrupting capital markets and investment sentiment. How big is the impact The background of this conference includes: 1) oil prices have fallen by nearly 30% from a mid-year high; 2) Europe, which has fallen into an energy crisis, “Winter has arrived”; 3) the US midterm elections are not far away, and under political and economic pressure from inflation, or...
In addition to boosting strategic reserves, calling on US oil companies to increase production is also a viable strategy. High oil prices have also spurred US oil explorers and refiners to step up efforts to increase production in order to seize the rise in oil prices.
The sharp drop in oil prices in early 2020 eliminated a number of overwhelmed US oil companies, so crude oil production has not yet returned to pre-pandemic levels. See the chart below. Although US crude oil production has fluctuated and fluctuated slightly, the trend is slightly upward, it has not returned to the level before the price collapse.
The energy game continues. After the OPEC+ meeting, the price of US oil futures once rose to 88 US dollars/barrel on Thursday, and the price of crude oil futures also rose to 94 US dollars/barrel. The cumulative increase this week was around 10%. At this meeting, OPEC+ will cut production by 2 million b/d from November 2022 based on the August 2022 production plan. This is the biggest reduction in production since the outbreak in early 2020, equivalent to about 2% of global oil demand, and the validity period may be extended until December 31, 2023. Judging from the data provided by OPEC+, OPEC member countries may cut production by 1,273 million b/d, from the August production plan of 26.689 million b/d to 25.416 million b/d; non-OPEC member countries may cut production by 727,000 b/d, from the August production plan of 17.167,000 b/d to 16.44 million b/d, as shown in the chart below. In fact, due to the slow pace of development of projects after the pandemic, the actual production of many member countries may not have reached the level of production plans, so although the extent of production cuts seems astonishing, the actual results may not be the case, the impact may be mainly on an ideological level — the signals released by the OPEC+ meeting are disrupting capital markets and investment sentiment. How big is the impact The background of this conference includes: 1) oil prices have fallen by nearly 30% from a mid-year high; 2) Europe, which has fallen into an energy crisis, “Winter has arrived”; 3) the US midterm elections are not far away, and under political and economic pressure from inflation, or...
The time is right for Buffett, who has continued to increase his holdings in oil stocks since this year.
$Berkshire Hathaway-A (BRK.A.US)$According to the announcement issued on September 28, 2022, the company continued to increase its holdings in oil and gas exploration developers from September 26 to 28$Occidental Petroleum (OXY.US)$The total number of common stock holdings increased by 5.8852 million shares. The purchase price ranged from 57.9116 US dollars to 61.3765 US dollars. Based on this, the average price may be 58.90 US dollars per share.
In addition, Berkshire also increased its holding of Occidental Petroleum's Series A preferred stock by $100,000.
Based on the calculation of Occidental Petroleum's equity announcement at the end of August, adding the number of shares held in September, the total number of Occidental Petroleum common shares currently held by Berkshire may reach 194 million shares, accounting for 20.86% of the latter's total issued shares.
On the day of the OPEC+ production reduction meeting (that is, October 5, 2022), Occidental Petroleum surged 2.37% in a single day to close at 67.74 US dollars, a 15% premium over Berkshire's most recent increase in average prices.
Also, Berkshire except$Apple (AAPL.US)$Chevron (CVX.US), the fourth largest shareholder after Bank of America (BAC.US) and Coca Cola (KO.US), a comprehensive energy company, also rose slightly by 0.57% to $158.53 on the same day.
Since this year, Berkshire has opened positions in Occidental Petroleum and has continued to increase its holdings in Chevron. As of June 30, 2022, Chevron and Occidental Petroleum are Berkshire's fourth and sixth largest holdings respectively (in terms of US stocks only).
Thanks to rising oil prices, Occidental Petroleum and Chevron have accumulated year-to-date increases of 135.14% and 38.88% respectively. It is clear at a glance who the smart investors are.
Mao Ting
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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