MacroVoices #479 Anas Alhajji: What Do Saudi Arabia & Allies in OPEC+ Want from Accelerating the Unwinding of Voluntary Cuts?

Episode Summary

Executive Summary: Macro Voices 479 centered on Anas Al-Hajji’s claim that the OPEC+ June output hike was not a price war, but a managed unwind of voluntary cuts aimed at restoring quota credibility, absorbing already-producing barrels, and sidestepping politics. The discussion also covered summer/Hajj-driven demand, Iran/Venezuela sanctions dynamics, U.S. shale’s slowing growth, LNG trade routes, and a still-cautious macro chart view.

Main Topics: OPEC+ June output decision is not a price war: Al-Hajji argues the media misread the Group of Eight’s 411 kbpd June increase. He says it is an unwind of prior voluntary cuts, much of the oil was already flowing illegally/above quota, and the move protects OPEC+ credibility rather than attacking shale. Saudi Arabia’s need to restore quota discipline and cohesion: The V8 ceiling increase is framed as a way to normalize overproduction, create room to reclaim past quota cheating, and preserve OPEC+ unity and reputation before the system loses all credibility. Seasonal demand: summer cooling and Hajj: Al-Hajji emphasizes that demand inside producing countries rises sharply in summer because of power-generation needs and in Saudi Arabia specifically during Hajj, reducing the net barrels available to the global market. Iran, Venezuela, and sanctions enforcement limits: He argues sanctions on Iran and Venezuela are imperfect and often circumvented. Trump’s tariff threats pressured Venezuelan buyers more effectively, but he says zero-export policies are unrealistic and heavy-crude replacement remains difficult. U.S. shale growth is slowing structurally: Higher rates, a changed industry model, and steep decline rates mean shale can no longer reliably offset global declines the way it did over the last decade, even if it does not collapse outright. Macro/technical market backdrop: Patrick and Eric view equities as still vulnerable to a bear-market-rally failure, the dollar as structurally weak with room for a countertrend bounce, crude as technically weak but potentially buyable on a deeper dip, and gold/uranium as constructive trends. LNG trade flows and geopolitical routing: The conversation highlighted longer LNG shipping routes around Africa and South America, illustrating how geopolitics, canal risk, and sanctions are reshaping energy logistics and supporting long-term LNG demand.

Key Arguments: The OPEC+ move was an unwind of voluntary V8 cuts, not a new supply shock from all of OPEC or OPEC+. Most of the additional barrels were already in the market as overproduction, so raising the quota ceiling mainly legitimizes existing flows. Saudi Arabia wants to preserve OPEC+ credibility; allowing repeated compensation failures would destroy the cartel’s reputation. Summer demand in the Arab world/Middle East and Hajj-related consumption materially reduce incremental barrels available to export. Trump’s visit to the Gulf incentivizes Saudi Arabia to de-politicize oil and keep discussions focused on Gaza, Iran, Houthis, Syria, and contracts, not oil prices. U.S. shale is constrained by high interest rates, a changed capital model, and very high decline rates, limiting future production growth. Sanctions on Iran and Venezuela do not create zero exports; they are circumvented through alternative buyers, payment systems, and ship-to-ship transfers. Venezuela’s heavy crude matters disproportionately because refiners need that specific barrel type, not just generic oil liquids. LNG demand remains a long-term growth story as new importing countries emerge and shipping routes become more geopolitically complex. The equity rally looks more like a bear-market rally than a confirmed new bull market, while gold remains in a strong uptrend and uranium/natural gas are showing signs of basing.

Data Points: SP 500 weekly change: +111 bps to 5631 - Macro scoreboard as of Wednesday, May 7, 2025 close U.S. dollar index weekly change: +29 bps to 99.92 - Macro scoreboard; described as bouncing from oversold conditions June WTI crude weekly change: -55 bps to 57.89 - Macro scoreboard; oil trading near April lows June RBOB gasoline weekly change: 0 bps to 202 - Macro scoreboard June gold weekly change: +166 bps to 3374 - Macro scoreboard; breakout in progress July copper weekly change: +22 bps to 462 - Macro scoreboard Uranium weekly change: +318 bps to 69.80 - Macro scoreboard; positive price action for second week U.S. 10-year Treasury yield weekly change: +10 bps to 4.27 - Macro scoreboard June OPEC+ output increase: 411,000 barrels/day - Decision for June; repeated after May increase May OPEC+ output increase: 411,000 barrels/day - Tripled versus April and surprised the market April OPEC+ output increase: 140,000 barrels/day - First step in unwinding cuts Cumulative increase by June: 950,000 barrels/day - April + May + June increases combined Original voluntary cut: 2.2 million barrels/day - The cut OPEC+ began unwinding starting April 1, 2025 Earlier voluntary cut: 1.6 million barrels/day - First major voluntary cut by eight members Summer demand in Arab world: ~1.2 million barrels/day - Estimated additional demand from cooling/power generation OPEC+ compensation issue: More than 1 million barrels/day by July - Al-Hajji said the April/May/June increases would cover Kazakhstan and Iraq overproduction Venezuela export decline after tariffs: -26% - Trump tariff threat reduced imports from Venezuela U.S. SPR release under Biden: 180 million barrels - Referenced as part of supply relief during Biden administration Floating storage paired with SPR release: 80 million barrels - Al-Hajji said Iranian oil in storage effectively augmented supply U.S. shale replacement need: 600,000 to 700,000 barrels/day each month - Needed just to offset decline rates and keep production flat Shale decline rate: 40% to 70% - Compared with 3% to 6% for conventional wells Historical growth assumption for long-term thesis: 4.6% global economic growth - Basis of earlier bullish oil/LNG thesis before COVID and slowdowns Chilean LNG route example: Around South America instead of Panama Canal - Illustrated shifting shipping routes for LNG Egypt LNG shipping example: Around Africa instead of Suez/Red Sea - Shell cargo to Taiwan bypassed usual route Macro equity retracement analogy: 50% to 78% - Patrick noted typical bear-market rally retracement range Potential SPX upside target: 5811 - 100-day moving average cited as next resistance Potential dollar bounce target: 101 to 102 - Retracement target from oversold condition Potential crude downside target: Low 50s - Technical measured move if weakness continues Gold key pivot level: 3200 - Eric/Patrick cited as the level that could trigger a larger correction Uranium ETF move: Up more than 30% off lows - Used to support view that the bounce has legs

Pivotal Quotes: "This is really not bearish the way you guys are looking at it." — Dr. Anas Al-Hajji: His central rebuttal to the market’s interpretation of the OPEC+ production increase "OPEC Plus without a reputation is nothing." — Dr. Anas Al-Hajji: Explaining why Saudi Arabia and allies need to preserve credibility and unity "The model is no longer there." — Dr. Anas Al-Hajji: Referring to the old shale industry model of growth funded by cheap capital and exit multiples

Implications: Near-term oil pricing may be less bearish than headlines suggest, but structural U.S. shale growth is slowing while LNG and heavy crude remain strategically important. Expect more volatility from geopolitics, sanctions, and seasonal demand than from a simple OPEC price war narrative.