Will OPEC+ sustain oil cuts amid bleak demand outlook?

Crude oil prices recently experienced a significant drop due to concerns surrounding the bleak demand outlook overshadowing the recent OPEC+ decision to maintain oil output cuts. This decision has left many wondering about the future of oil producers and if they will stick with the current output policy amidst ongoing economic uncertainties. Kola Karim, Chairman of Shoreline Group, shared his insights on the matter in a recent interview on CNBC Africa. Karim highlighted the challenges faced by the oil industry, particularly the softening global demand, rising global pricing, and the impact of inflation on manufacturing outlook worldwide. The recent cuts made during the OPEC+ meeting, with Saudi Arabia reducing output by 1.3 million barrels and Russia cutting by 300,000 barrels, have not been sufficient to counter these challenges. Despite this, Karim sees a short-term firm stance by most producers and anticipates the market will stabilize soon. Decarbonization has been a major topic of discussion in the oil industry, with many concerns arising about the future of oil and its role in transitioning to cleaner energy sources. Karim emphasized that while net zero targets are a focus, oil will continue to play a significant role in the energy transition. He mentioned the recent shift towards gas as a transition fuel during the Russia-Ukraine crisis, illustrating the interdependence of gas and oil production. Karim also addressed the production dynamics between Nigeria, Angola, and Libya, expressing cautious optimism about Nigeria's potential to ramp up production. He stressed the importance of government support in providing security for infrastructure and pipelines to meet production targets. Karim noted that stability in security and increased funding for production efforts are crucial for all three countries to achieve their production goals. Looking ahead, Karim shared his perspective on the possibility of oil prices hitting and sustaining the $100 per barrel mark in the last quarter of the year. He attributed the recent drop in prices to a slow demand outlook but pointed out a long-term decline in production rates globally. Karim predicted a return to higher oil prices in the future, with $100 oil still being a viable outcome by the end of the year. In conclusion, while challenges persist in the oil industry, Karim's insights shed light on the complexities facing oil producers and the delicate balance between supply, demand, and economic factors. The road ahead remains uncertain, but adaptability and strategic decision-making will be key for the industry to navigate the evolving landscape.