Brent Oil: Short-term target lowered to $78 despite OPEC+ deal – ANZ

The OPEC+ alliance finally reached agreement on increased output levels in a hastily convened meeting over the weekend. The deal allows for monthly hikes in supply of 400kb/d over the course of the new agreement. Subsequently, strategists at ANZ Bank pulled back their short term target for Brent to $78/bbl.

New OPEC deal to provide some stability

“The new agreement allows for the 400kb/d increase to start in August 2021 until phasing out the 5.8mb/d production adjustment. The alliance will continue to hold monthly meetings at which it can adjust production according to market fundamentals.”

“The new agreement is likely to see prices come under pressure in the short term, as investors unwind positions on the prospects of higher supply in coming months. However, even with higher output, the market remains relatively tight.”

“OPEC’s ability to reach an agreement should dispel concerns that the alliance is at risk of breaking up. Its monthly reviews of the agreement should allow it to make adjustments should fundamentals shift. This will provide some stability to the market over the coming months. Nevertheless, the likelihood of prices surging higher over the next month or two has diminished. As such, we are pulling back our short term (0-3 month) target for Brent crude to $78/bbl.”