Oil: The OPEC Demand-Saudi Cuts Disconnect

investing.com:

The world’s largest oil producing group says demand is steady and will get better through 2024. But the biggest exporter within the cartel is so afraid of lower prices for crude that it has to artificially suppress supply with draconian production cuts.

For years, there’s been a disconnect in the messaging between the monthly reports of the Organization of the Petroleum Exporting Countries, or OPEC, and the  production of its principal co-founder Saudi Arabia — which practically makes all decisions for the 13-member cartel.

OPEC’s monthly outlook on supply-demand is written, arguably, with one primary objective: Getting a higher price per barrel for crude. 

Thus, OPEC’s outlook alternates between scenarios of high demand and softer ones. The more positive its outlook, the greater the potential for higher crude prices — and vice-versa, of course. 

When demand looks suspect, it’s logical for oil producers to calibrate supply accordingly and no one would blame the Saudis and others within the group for making production cuts. 

The problem though is when demand is perceived to be good or at least steady. Adding to production cuts at that time, using the fiction of oversupply, makes a joke of OPEC’s outlook — particularly when the group is suggesting the opposite about oil consumption.

Thus was the case with the August outlook of OPEC, released two days prior to this article. The group maintained its outlook from July that global oil demand will grow by 2.44 million barrels per day this year and by 2.25 million in 2024. 

The Saudis, on the contrary, announced a million-barrel per day cut for July and August. Then, a few days into this month, just before a monthly meeting of OPEC+ — which bands OPEC’s 13 core members with 10