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OPEC+ Likely To Continue To Support Oil Market: Another Unconventional Data Point Emerges

Jan. 03, 2022 3:26 PM ETCrude Oil Futures (CL1:COM)30 Comments
Josh Young profile picture
Josh Young


  • Kuwaiti candidate appointed OPEC General Secretary.
  • Kuwait is out of or close to out of spare capacity, per Bison analysis.
  • Indicates continued oil market support as Kuwait unlikely to support other countries flooding the market, hurting price, when they can't participate.

Kuwait Promises To Increase Oil Production In Case Of War

Joe Raedle/Getty Images News

As OPEC+ meets to decide on their next adjustment to production quotas, news has emerged that the Kuwaiti candidate for OPEC Secretary General has been elected. This may not seem like much to the casual observer. But similar

This article was written by

Josh Young profile picture
Josh Young is the Chief Investment Officer of Bison Interests, an investment firm focused on publicly traded oil and gas companies. And he is the former Chairman of the Board of Iron Bridge Resources, which sold to Warburg Pincus and CPPIB backed Velvet Energy in 2018 for $142 million. He is a value investor primarily focused on energy stocks, natural resources stocks, and companies trading at low multiples to earnings, cash flow, or book value. He has presented at numerous investment conferences, including Platts, LD Micro, Oil & Gas Money, Louisiana Energy Conference, and the Global Resources Investment Conference and has been featured in media including Barrons, Bloomberg, Business Insider, Fox Business News, RT and Oil & Gas Investor Magazine. He is a graduate with honors from the University of Chicago in economics.

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Comments (30)

Josh Young profile picture
I discussed this on BNN Bloomberg today www.youtube.com/...
Something tells me they cant crank out the 400K barrels a day more. Today WTI hit 90 bucks. If they could pump more, I dont think they could resist. However , maybe the last 2 yrs taught them something..... Nah, the'd have forgotten by now.
PT Larry profile picture
@ihookem I blame COVID and the associated demand destruction. Many rigs and even E&Ps shut down, some for good. Restarting, not so easy.
Dude you've been calling OPEC supply constraints since last year and its actually happening...sooner than expected. Great job at calling it out 👏
PT Larry profile picture
Thanks for the article.
The Energy Realist profile picture
Just wondering, what is the evidence that the nationality of the SG has influenced OPEC's decisions in the past? Most decisions require unanimity which is based on bargaining among the members. Past SGs en.wikipedia.org/... make it look like the role is ceremonial and filled on rotational principle so everyone gets their turn. It would be great news for oil equities and for my positions if the Kuwaiti SG restrains production, but I am a bit lost on the causal link here.
Wimal profile picture
To balance this discussion, here is a link to an interview w/ Citi Global Head of Commodities Strategy Ed Morse, who says there will be ample supply increase from non-Opec countries to more than offset oil demand in 2022:

The only way for Kuwait to sell more oil is for the joint owned Kuwait/Saudi neutral zone to return to production. This will be the LAST field Saudi turns on because it is better for Saudi to produce its higher quality 100% fields first. When Kuwait/Saudi restore production in neutral zone, it will be a sign that even SAUDI has no surplus capacity. We should see this play out by 2023 or 2024. And by then, oil prices will be zooming back above 100...Plus, IRAQ fields are getting close to bubble point and production MUST be lowered or damage to the reservoirs until the SeaWater Injection projects are started up (massive investments required by IRAQ). Increasing activity in US will be a struggle: need rigs, people and finance and pipelines plus ESG, Biden and wokeness will delay everything. With 75 year lows in new oil discoveries, PEAK OIL by 2024...or a RECESSION buys us 2 year delay and PEAK OIL in 2026.
Great article as usual for you. I like it when authors are willing to go down not so trodden paths.
Vivat Aurum profile picture
Great analysis as always Josh, appreciate you sharing your perspective on a somewhat minor event (in my mind previously) and giving me a new angle to consider
Josh Young profile picture
@rjm1977 thanks! It's minor if it goes well. Not so minor if it doesn't. Hard to forget 2018 and 2014 🤢
cenc profile picture
2022, year of the rip your face off rally in the oil service sector. The artificial price support from OPEC+ withholding barrels is over. Now everyone will have to spend some real money to drill, or watch their production decline in the face of rising prices.
@cenc will the oil service sector be able to pass on inflationary costs though?
@vxmike Halliburton stated they were able to in their latest earning report.
It seems to me that Biden administration has changed its attitude towards US oil production and now seems to encourage more production. Do you agree? Would that mean US shale production will increase if oil prices are around $100 and the future is bright since OPEC is not able to increase production much?
@kron7777 too little too late. Oil investors have decided they want shareholder returns and producers are obliging. The days of overdrilling are finished.
Right. When oil is $70 and the future price is uncertain.
If Oil is $100+ and everyone expects that it will go to $200 - oil investors will be screaming that they don't want small returns now and would rather have huge returns in the future.
Doc 224899 profile picture
Just one more example of the foolishness of allowing our national energy policy to rely upon the "generosity" of OPEC+, a hostile consortium that now has the power to crank of our inflation rate and crater our entire economy.
Doc 224899 profile picture
@Doc 224899 ...to crank UP our inflation rate...
@Doc 224899 Then you must have loved OPEC when they crushed oil prices a few years ago...and cratered the oil patch.

Ironically, it was just what the oil patch needed to stop the idiotic 'drill, baby, drill' mentality and focus on profitability rather than mindless production growth fueled by debt. And it's that production restraint that has pushed up prices.

The oil patch should kiss the Saudi's backside for teaching them a much-needed lesson.
Prezzo giusto profile picture
@farwest One of the most sensible comments i have read in a comment section on oil.
compsys68 profile picture
Another great article I will post to the Main Group!!!!
Josh always posts great content. thanks !
Great article Josh, thanks for sharing. It will be interesting just what OPEC+ "says" at all tomorrow... as they most likely will not say anything to upset the current apple cart (which, IMHO, means they will "say" they are going ahead with the planned 400K barrel increase... however, we know that it will actually be less than that). Therefore, I think that your article is even MORE impactful, because, if as you say, that OPEC+ were to NOT increase quotas, then I think we see a BOUNCE of oil back above $80... which would be nice.

Oil and gas equities are having a great day, and hopefully the OPEC+ news tomorrow will not cause any negative sentiment... which I think could be quickly outbalance by another DRAW on US crude supplies by both the API tomorrow night and EIA Wednesday morning.

I think that either way, we see $80/barrel WTI before the end of January... and the quicker the better. If we have oil back over $80 when the oil and gas companies start reporting earnings (end of January first week of February) then the good news could really see some positive price momentum.
Pete Palmer profile picture
Great article Josh and interesting point about the new Kuwaiti OPEC General Secretary. We're setting up for the oil price spike in 2022/2023. I'm leaning towards Q4 2022, but could see prices spiking in 2023 before prices fall to a lower triple digit range due to demand destruction from the spike and increased unconventional production.
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