Saudi discipline and demand stability a catalyst for crude outperformance - TDS

"The OPEC+ cartel's promised production cuts helped WTI and Brent crudes surge as much as 30 percent above their late-December lows," note TD Securities analysts.

Key quotes

"But the upward momentum has been on the wane, as the robust demand growth expectations are being questioned, while lingering concerns that OPEC and Russia, motivated by the loss of market share, may be working on a plan for an exit strategy also arise."

"To see prices further their upward trajectory toward our $60/bbl WTI and $70/bbl Brent targets, OPEC+ will need further supply cuts in the coming months and evidence of tightening markets in US inventories wil have to appear. After production in January was some 1.5m b/d lower than the October benchmark level, and with Saudi Arabia continuing to show commitment to the agreement by signaling an additional 400k b/d of cuts by March, OPEC appears to be doing their part, which makes us confident that prices will reach our targets."

"Should additional OPEC cuts be maintained throughout the balance of 2019, US shale production momentum shift into lower gear, a trade deal between US-China be struck, and no renewal of waivers for Iran sanction be issued, then there is potential for both WTI and Brent to move $5-10/bbl above above our price targets."