OPEC
Today we note Saudi Arabia will take 1m bbls out of market, and that will clearly be supportive to Oil & Gas pricing today.
Longer run, in our view, the cartel will break.
The incentives ex Saudi Arabia are just too strong given a future in which hydrocarbons zero out.
Also, each time the cartel does something like this, the rest of world response is to simply accelerate the build out of substitutes, across geothermal, solar, wind, and the smaller solutions, heat pumps and the like.
Necessity is the mother of all invention, as it will be here.
Further, we also noted that Japan’s LNG imports are declining, and they’ve also begun to restart some of their nuclear fleet, all of which is in response to the need to move away from fossil fuels.
Qatar has a huge amount of uncontracted natural gas that they will almost certainly dump into market by 2026, suggesting again that the longer run picture is bleak for many of the LNG projects presently under construction.
So, whilst it means a bit of volatility in the now, by and large, we will stick with our energy underweights.
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