I just got off a zoom call with Mike Rothman (Cornerstone Analytics). Mike has been attending the OPEC meeting and gave a debriefing with his thoughts on today's meeting. I don't know how I keep getting invited to CA meetings because I am not a client, but I prefer not to look a gift horse in the mouth. Mike has attended OPEC meetings for 35 years in various capacities and he has been in the business for 40. He has relationships with Opec and has worked with them for a long time.

I'm not going to show his slides as they are proprietary and I don't want to violate their trust. Below is my summary of what was discussed (sans the slideshow). My points are not listed in order by importance.

1. The 2024 cuts accomplished a re-alignment Opec has been trying to do for some time. African producer (Algeria, Nigeria) are reduced to reflect the fact that they cannot meet the current quotas, and most likely won't be able to meet the 2024 quotas either. Both nations are on-board with a reduction in their quota shares. UAE finally picked up an additional 250 mbbls/d quota for next year - in recognition of their changed production profile since the original quotas were established.

2. Russia's quota was reduced by over 1 million bbls/d for 2024, recognizing the fact that their production has peaked and won't be increasing. Mike says that, contrary to all the press reports, their production has indeed rolled over and, especially in their western Siberian oil fields, production is really challenged going forward. Russia acknowledged their lower quota and recognizes that they are no longer going to have "equal quotas" to Saudis. He talked about the market sentiment that, when the Ukraine war finally ends, Russia will quickly recover back to their old production levels. Mike doesn't believe there is even a remote chance of that and it will become obvious to everyone.

Saudi's are really PO'd about SPR's being used to quash oil prices. They want a fair price for their oil (which Mike pegged at $102/bbl for Brent). Their decision to cut another million on a volunteer basis reflects two things. First, they have a need to rest some of their fields and the additional cut will let them do this. Second, they want to deplete SPR overhang once and for all. Their view is that the SPR has never been looked at by market players as standing inventory in past years, but with all the releases last year and this year, the market is now factoring it in to the "inventories" against which the oil price is determined (much like Romm has been saying all along). The Saudi's have pretty much decided to shock the price up to it's preferred trading range and will hold oil off the market until inventories get to the place where chronic shortages become feared (over the now oversupply fear). They intent to reduce inventories until the market cries uncle.

He spoke about several other things I won't detail now, but one question in the Q&A discussed cheating and supply. SA (Opec) is not especially worried about supply because of limited ability for Opec members to overproduce and the fact that non-Opec production increases are already factored in and won't change the top line materially.

I worried about China using their SPR to work the price, much like they do with copper and other commodities. Mike said that China's oil import percentage keeps climbing each year (total use minus domestic production). China will keep adding to their SPR - especially now as relations with the west continue to deteriorate.

I'm sure I missed some things, but wanted to shoot out this summary as quickly as I could.