OPEC Receives Bearish Outlook on Oil Market from Leading Swap Dealer
LONDON – In a surprising move, OPEC invited a prominent financial market dealer to present a bearish perspective on the oil market, according to exclusive materials obtained by Reuters. The presentation by Onyx Capital Group, the world’s largest market maker in oil swaps, highlighted a recent shift in sentiment towards a bearish outlook as the end of the year approaches.
The evidence presented by Onyx Capital Group suggested that market sentiment, which had been fragmented throughout the year, was aligning towards a bearish view. Slides from the presentation showed that Brent futures had experienced two significant sell-offs in the last quarter. The first, driven by weak U.S. gasoline markets and financial speculators, occurred from September 27th to October 2nd. The second sell-off in November further solidified the market’s collective neutral-to-bearish sentiment, with commercial participants and financial speculators anticipating a weak outlook.
Onyx Capital Group’s dataset, which analyzes market positions to predict market behavior, revealed that the oil market forward curve indicates a likely return of heavy crude supply from several OPEC members next year, leading to inventory rebuilding.
The exclusive presentation by Onyx CEO Greg Newman, though not publicly released, sheds light on the critical economic developments and market conditions that OPEC’s Economic Commission Board (ECB) reviews twice a year. The research produced by the ECB is essential for OPEC and its allies in making output policy decisions.
OPEC and its allies, collectively known as OPEC+, are set to meet on Sunday to discuss output policy amid falling oil prices, which have declined over 13% in the current quarter. The group is expected to consider output cuts to stabilize the market. Goldman Sachs predicted that Saudi Arabia and Russia would extend their voluntary production cuts into the first quarter of 2024. The investment bank also suggested a 35% possibility of deeper production cuts, which could involve a reduction of 0.5-1 million barrels per day, shared among major producers such as Saudi Arabia, Russia, the UAE, Iraq, and Kuwait.
While OPEC has not yet responded to the request for comment on the presentation, the insights provided by Onyx Capital Group offer a unique perspective on the current state of the oil market and the potential actions OPEC may take in response.
As OPEC+ prepares to make critical decisions, the market awaits the outcome of Sunday’s meeting to gain clarity on the future of oil production and its impact on oil prices.
