OPEC Decision Brings Encouraging News for T&T

  • The decision by the Organisation of Petroleum Exporting Countries (OPEC) and some of the world's largest producers on March 3, 2024, to cut oil output to increase crude prices is encouraging news for Trinidad and Tobago and Finance Minister Colm Imbert.
  • Notably, OPEC announced that the 2.2 million barrels per day of voluntary output cuts that were planned for the first quarter of 2024 will continue into the next quarter. The impact of this could likely be an increase in oil prices, though some analysts believe that the low production had already been priced in.
  • High oil prices will help Imbert increase his revenue from taxes on petroleum producers and could result in a better performance from State-owned Heritage Petroleum, potentially leading to dividends for corporation sole.
  • However, even the decision to cut output and, by extension, raise prices is unlikely to help the Finance Minister reach his budget target of $16Bn in revenue from the energy sector in the Financial Year 2024.
  • In the 2024 budget Imbert said, 'For that reason, our oil price assumption for 2024 will be US$85 per barrel (bbl) compared with US$92.50 per barrel in 2023, and our natural gas price assumption will be US$5 per MMBtu (Metric Million British Thermal Unit), compared with US$6 per MMBtu in 2023.” The price of US$85 a barrel has only been achieved in the first month of the 2024 financial year.
  • Global financial firm Tudor Pickering & Holt (TPH) on Monday told its clients while it is positive to see OPEC+ members continuing to manage the market, it ultimately viewed this news as neutral given that the market continues to balance off OPEC+ taking barrels offline.
  • 'Overall, we continue to see US$80/bbl Brent as a good clearing price for crude fundamentally with the market needing cut to stay in balance, and we would likely need to see a material reversal of voluntary curtailment met by growing demand before becoming more constructive on the commodity backdrop,' TPH said.

(Source: Trinidad Express Newspaper)