Saudi, Russia, Kuwait, UAE may hike oil output by end-2019: BofAML

Saudi Arabia, the United Arab Emirates, Kuwait and Russia are likely to announce a gradual oil output increase adding up to 1.2 million barrels per day (bpd) by end of 2019,  Bank of America Merrill Lynch (BofAML) said in a new report.

"We see an output increase announcement, maybe data-dependent, that targets a modest deficit. Our baseline is for a combined 200,000 bpd quarterly average ramp from Russia, Saudi, UAE, and Kuwait through end 2019 that adds up to a total of 1.2 million bpd," the report added.

The bank also suggested that the oil cartel could change its stated OECD total oil inventory level target to days of forward demand coverage, calling it as “a more useful metric.”

Furthermore, OPEC+ could add new policy tools such as relative price levels, term structure, and volatility to better assess market conditions.  The group could also announce a major capex plan to keep a lid on long-dated crude prices because the drop in spare capacity is a risk to long-term oil price stability, the report stated.

According to BofAML,  the market is “at last balanced,” explaining a balanced commodity market implies stable inventories, stable prices, and a stable term structure.

"The deal OPEC+ inked at the end of 2016 surely had a lot to do with it. But a strong global oil demand tailwind and a collapse in Venezuelan crude exports have also been key drivers of the decline in OECD inventories in the past 12 months. Naturally, the constructive price backdrop forced out short oil speculators, likely contributing to reduce oil price volatility too," it added.

The bank warned that OPEC+ key policy decisions during their Vienna meeting on June 22 could have a profound long-term impact on the oil market.