Monday, March 4, 2024

No matter how much OPEC cuts oil production, other countries will ‘fill the hole,’ trader says

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  • No matter how much OPEC cuts oil output, other countries will “fill the hole,” a senior equity trader said.

  • A surge of supply from non-OPEC nations like US, Brazil, and Guyana has surprised oil markets this year.

  • “We’re looking at 2024 and we’re concerned that the market is actually going to end up being oversupplied.”

Despite efforts by Saudi Arabia and Russia to prop up crude prices by cutting production, countries like Guyana, Brazil and the US have pumped more oil than ever.

That supply is now so strong that even if OPEC+ slashes more production, the spigot of oil from non-members will continue to douse the market.

“I think it’s more of a supply story going into 2024,” Rebecca Babin, senior equity trader for CIBC Private Wealth, told CNBC on Monday. “There’s a lot of fear that no matter what OPEC does, no matter how much they cut, there are producers — non-OPEC producers — that are just going to fill the hole they keep digging.”

She added, “We’re looking at 2024 and we’re concerned that the market is actually going to end up being oversupplied.”

According to Babin, oil markets are staring down the barrel of the glut of supply from non-OPEC nations that sank oil prices this year.

US crude production has notched record levels, topping 13 million barrels a day in September. Production from Brazil and Guyana has also flooded the market this year.

Supply is so strong, in fact, that flare-ups in the Red Sea as Houthi rebels target fuel tankers, oil prices haven’t seen a dramatic move.

“It’s not going to rally on supply-driven events,” Babin said. “We have a ton of spare capacity sitting on the sideline from Saudi Arabia and the UAE. They are literally chomping at the bit to bring back more production.”

Babin also explained that fears of energy trade disruptions at the Suez Canal are misplaced because most of the fuel traversing the waterway is Russian oil on its way to India and China — which isn’t a target for the Houthis.

Read the original article on Business Insider

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