OPEC strategy Markets should expect production cutbacks from OPEC+, and on the voluntary level from Saudi Arabia and its allies extending into January or the first quarter of 2024, Alhajji noted. This is because demand seasonally declines in the first quarter. But, what he anticipates could happen is an announcement about additional voluntary cuts from Saudi Arabia.
"Why all of this?" Alhajji said. "Because we believe that the only way the Saudis can be in the driver's seat in the oil market without anyone else with them is if we are in backwardation, where today's prices are way higher than the following month's prices."
Right now, it's the opposite, he said. The futures market is in contango, which means futures contracts are higher than current prices. This incentivizes investors and companies to store oil, causing inventories to rise. If Saudi Arabia does implement additional cuts, then this will flip the futures curve into backwardation, he noted.