Oil production losses in Venezuela, Angola and recent Iranian sanctions have tightened the market more than intended by OPEC.
Saudi Arabia and Russia are considering raising output by one million barrels per day. ANZ Research expects OPEC to increase production by 600 mb/d in the second half of 2018 as it looks to stabilise prices amid supply disruptions within the group. Such an increase could be absorbed by the market without altering the fundamentals.
Longer term, ANZ Research believes Saudi Arabia and Russia will maintain their cooperation to keep prices relatively high.
The market is also in better shape to absorb more crude oil. Inventories have been steadily declining over the past 18 months and demand is strong.
Even with these increases in output, the market is still in a supply deficit. This should provide support to prices.