Monday, June 5, 2023

Why the Saudi output cut could be a bullish catalyst for energy stocks

The Saudis made a surprise unilateral cut of 1 mbpd at the OPEC+ meeting on the weekend. The NY Times reported that the Kingdom was forced to make the move as a matter of fiscal necessity:

Saudi Arabia is in “whatever it takes mode,” Helima Croft, head of global commodity strategy at RBC Global Markets, wrote in an investor note this morning. That the country is “willing to shoulder it alone adds to the credibility of the cut and signals real barrels coming off the market.”

Analysts calculate that Brent needs to stay above $80 in order for Saudi Arabia to keep its budget balanced and to finance the ambitious infrastructure program backed by the country’s crown prince, Mohammed bin Salman.

Oil prices initially popped in reaction to the cut, but pulled back over the course of the day.

Here's what the cut may mean for energy stocks.

The full post can be found here.

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