The OPEC+ "flexible and coordinated" exit strategy is likely to allow Saudi Arabia to regain market share within the cartel and manage the market to support oil prices, Bank of America Merrill Lynch (BofAML) said in a new report.
Every 250,000 barrels per day (bpd) increase in Saudi oil production will represent a change in the fiscal breakeven oil price by $2.2 per barrel, leading to a 0.5 percent change in the fiscal balance.
"Energy policy is thus likely to facilitate the ongoing fiscal adjustment and support government credit-worthiness," the bank noted.
The report estimated that output hike of 400,000 bpd at $70 per barrel in the second half of 2018 would bring the fiscal deficit below 6 percent of GDP and entrench an external surplus.
However, it warmed that the agreement may lead to more challenging intra-OPEC dynamics and raise regional tensions depending on the path for Iranian oil production.
Last Saturday, OPEC and Russia agreed to abandon their individual quotas which were initially agreed in November 2016 and decided to move to a collective quota.
Earlier this month, Saudi Energy Minister Khalid Al-Falih suggested that the total OPEC+ output increase would be close to one million bpd and a measurable increase in Saudi oil production would take place from July.
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