Brazil joins OPEC+
The Commodity Report #132
Brazil joins OPEC+
Brazil will join the OPEC+ alliance in January 2024, in a move that adds South America's largest oil producer to the group's market influence, the alliance confirmed last week.
We haven't yet details though whether Brazil will participate in quotas. Brazil currently produces around 3.2 million bpd of crude and is a major supplier to China. The biggest benefit of being an OPEC+ member comes arguably when prices collapse. Cooperation to cut production benefits every member. If the Brazilian government agrees to cut in the future, it will ask its state-owned company Petrobras, to cut.
Brazil is the tenth-largest exporter of oil in the world, exporting $30.7 billion worth of oil in 2021, accounting for 3.23% of the world's total. In 2022, the country produced 3.77 million barrels of oil per day, which was 4% of the world's total. The country has 12.7 billion barrels of oil reserves; the second-largest in South America, after Venezuela.
On the other hand tehre still seems to be quite some unsolved issues about Brazil joining OPEC+. "There is no quota," said Petrobras' CEO last week. "We would never be part of an organization that imposes quotas ... Petrobras is a publicly-traded company".
Moreover, the alliance announced further oil supply cuts of which 1.4 million bpd were new.
Saudi Arabia will maintain its cut of 1 million bpd in the first quarter of 2024. Additionally, Russia will deepen its cuts by 1 million from January onwards. Voluntary cuts were also announced by Iraq (220,000 bpd), Kuwait (135,000 bpd) and Oman (42,000 b/p).
South America’s GDP Emerges
South America developed from a frontier market to an emerging market and one could argue that Brazil, due to its strategic importance as the most important commodity exporter, is already a developed economy. Great to see how the country has changed in 40 years also in terms of purchasing power.
On a side note - Barron’s published this cover story over the weekend with the title “Nvidia Stock Is Still Undervalued. So Are These 2 Smaller AI Plays“ AI sentiment with regards to mass media seems to be still very bullish.
This week look out for the following:
ISM Services PMI and JOLTS Job Openings on Tuesday
Job Market Report and Prelim UoM Consumer Sentiment on Friday
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Till next Monday, Lukas