Only an OPEC+ output cut can halt short-term Brent losses: UBS

Quantum Commodity Intelligence - Only a cut in OPEC+ production levels of at least 500,000 bpd can stop the current bearish sentiment in crude oil markets, investment bank UBS said in a note on Tuesday.

Brent futures tumbled to pre-Ukraine war levels at the start of this week, touching $84/b at one point, alongside the broader risk-off environment caused by tightening monetary policies and a strengthening dollar.

While the Swiss investment bank remains bullish in the longer term, forecasting Brent to rise to $110/b by December and $125/b by March, it said near-term price stability could only come from OPEC+.

"A lack of action by the group to remove barrels from the market is likely to spur further downside pressure on oil prices," UBS said.

The bank said the Saudi energy minister could call a meeting between now and the next OPEC+ meeting, scheduled for 5 October, to stop the bearish sentiment.

"To address prevailing oil demand concerns, stop the negative price momentum and set a floor to prices, we think the group has to announce a production cut of at least 0.5mbpd over the coming days".

Earlier this month, OPEC+ announced a production cut of 100,000 bpd in October, reversing the 100,000 bpd September increment and effectively returning to August quotas.

Analysts said that small increments of 100,000 bpd up or down have little impact on actual production levels given that the group is collectively missing targets by nearly 3 million bpd, although it would send a signal to the market on broader policy.