The selloff triggered by te OPEC+ announcement it may roll back some production cuts was unjustified and the outlook for prices is more bullish than many believe.
This is according to Eric Nuttall, portfolio manager at Ninepoint Partners, who told Bloomberg that there appeared to be a misunderstanding about the actual plan of OPEC+, which did not state there will be rollbacks of the cuts come what may.
“I think it’s [the selloff] rooted in a strong misunderstanding of what came out and what OPEC+ is trying to achieve,” Nuttall told Bloomberg.
“The concern seems to be that the eight members who are voluntarily curtailing volumes came out with a roadmap outlining that they would extend the cuts through the next quarter and then beginning in October slowly and gradually bring those back on,” the financier said.
“The misinterpretation is (that) there’s this rigid plan to bring on volumes, there’s concerns about a weakening economy in the United States, China, etc,” Nuttall explained, noting that the OPEC+ plan was “not etched in stone.”
In that, the Ninepoint portfolio manager echoed remarks made this week by the Saudi Energy Minister and the Russian Deputy Prime Minister who both said essentially the same thing. There was no immutable plan to bring supply back during the second half of the year. The plan was to see if market conditions would be right to do that—exactly as OPEC+ had said in its official statement following the June 2 meeting.
“The cornerstone of OPEC policy has been to be proactive, pre-emptive and precautionary,” Nuttall told Bloomberg. “Anyone who follows OPEC should have known that this is not a rigid plan; it’s subject to market conditions.”
He also forecast that trader sentiment is about to change soon, predicting substantial acceleration in drawdowns from global oil inventories beginning next week.
By Irina Slav for Oilprice.com
