Baku, Azerbaijan, May 25
By Leman Zeynalova – Trend:
If OPEC fails to reach an agreement in Vienna, this would put significant pressure on prices which could fall to an annual average of $43 per barrel for Brent in 2018, according to the report of the UK-based consultancy firm Wood Mackenzie.
Wood Mackenzie analysts believe that if OPEC stops trying to support oil prices and seeks market share instead, OPEC and Russian production will start to rise in the second half of 2017 and continue to increase next year.
“In the run-up to the meeting, some members within OPEC briefly considered the option of deeper cuts on top of the production restraint already in place. The benefit would be a larger implied stock draw in the third quarter of 2017 than we currently forecast – potentially as much as 1.8 million barrels per day, helping to clear current oversupply,” said the report. “This would lead to higher prices in the second half of this year – with Brent forecast to rise just above $60 per barrel at the end of the year.”
A nine-month extension would have little impact on price forecast for 2017, which is for an annual average of $55 per barrel for Brent, said the analysts.
“Into 2018, we expect Brent would average at least $55 per barrel on a monthly basis,” said the report.
Finally, OPEC could also extend the existing agreement through the whole of 2018. In this case, Wood Mackenzie forecasts that the annual average for Brent in 2018 could be as high as $63 per barrel.
OPEC and non-OPEC countries will hold a meeting in Vienna on May 25 to make a final decision on extension of the oil output cut deal reached in 2016.
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 barrels per day starting from Jan. 1, 2017 for six months, extendable for another six months.
OPEC agreed to slash the output by 1.2 million barrels per day from Jan. 1.
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