Salient to Investors:

  • Harry Tchilinguirian at BNP Paribas estimates that Brent will be supported at $80 to $85 a barrel and could rebound to $95 by year-end because it is not in OPEC’s interest to see prices too low for too long.
  • Analysts are split on whether OPEC will cut its oil-production target for the first time since 2008.
  • Eugen Weinberg at Commerzbank said the floor price of $80 a barrel may drop if OPEC rejects cuts next month but that it is very difficult to say what the target will be until we know what the real purpose of the price war is – Saudi Arabia is trying to test not only other OPEC members but US shale and Russia.
  • Mike Wittner at Societe Generale expects OPEC to cut output next month because the Saudis want others to cut, a significant change from recent years when they would just adjust production.
  • Saudi Arabia can protect its market share by keeping production steady even as prices fall, while Russia, Iran and Venezuela stand to lose the most from the drop in prices.
  • Daniel Hynes at ANZ Banking said the Saudis are trying to protect their patch in Asia.
  • Francisco Blanch at Bank of America said WTI may drop to $75 but Brent has a lot of support at $85 and expects a cyclical rebound in the next 3 months because many emerging economies benefit from a strong dollar, strong US economy and lower energy prices.
  • Miswin Mahesh at Barclays said any support for Brent prices will have to come from the supply side as Q4 demand won’t move significantly higher – a cut of at least 1 million barrels a day of supply is needed.

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