Baku, Azerbaijan, March 23
By Leman Zeynalova – Trend:
OPEC oil output cut deal could be extended for a shorter period, perhaps to three months or so, instead of six months, Tom Pugh, the economist at British economic research and consulting company Capital Economics, told Trend March 23.
“It seems that the market expects the OPEC cuts to be extended. We also think this is now more likely than not,” said the expert.
OPEC will be especially wary of increasing US production, as there is no point OPEC continuing to cut output if the US is filling the gap, according to Pugh.
The expert believes that if Saudi Arabia decides that other countries aren't pulling their weight in the deal it could also decide not to renew cuts.
“For the deal to collapse it would need one or more of the OPEC members to increase production and effectively no longer participate in the deal,” he said. “This could then cause Saudi Arabia to increase its production which would effectively kill the deal. This is quite unlikely, but countries like Iran, Iraq and Venezuela have been reluctant to lower the output.”
In December 2016, OPEC and non-OPEC producers reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices.
Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 bpd starting from Jan. 1, 2017 for six months, extendable for another six months, to take into account prevailing market conditions and prospects.
OPEC agreed to slash the output by 1.2 million barrels per day from Jan. 1, with top exporter Saudi Arabia cutting as much as 486,000 bpd.
According to OPEC Monthly Oil Market Report, world’s oil supply decreased in February by 0.21 million barrels per day compared to January to average 95.88 million barrels per day. In November 2016, world’s oil supply was at 96.84 million barrels per day.
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