Cutting oil inventories back to 5-year average – hard task
Baku, Azerbaijan, May 30
By Leman Zeynalova – Trend:
It will be harder to achieve a drop of oil inventories back to the 5-year average, Spencer Welch, director of the oil markets and downstream team in the London-based IHS Markit, told Trend May 30.
It depends on global oil demand continuing to grow and on how fast US crude production increases, the expert said commenting on the latest decision of OPEC and non-OPEC countries to extend the oil output cut deal by nine months.
The latest meeting of OPEC seemed very smooth with a lot of unity including with non-OPEC members such as Russia, said Welch.
“The day before the meeting the cut compliance monitoring committee (JMMC) reported that they recommended a 9 month extension of the existing cut and that is exactly what happened,” he added.
He believes that in terms of long-term, this meeting shows that OPEC and Russia are united in doing “whatever it takes” to pull down high oil inventories and to provide oil price support.
“OPEC is alive and back in the oil game again,” said Welch.
It would have been very difficult to increase the cuts, as it is very hard to agree who cuts how much extra, by far the easier thing is to just keep the existing cuts, according to the expert.
Regarding the outlook for oil prices, Welch said crude prices are expected to stay at $50-55 per barrel right through to end 2018.
On May 25, OPEC member countries and non-OPEC parties, Azerbaijan, Kingdom of Bahrain, Brunei Darussalam, Kazakhstan, Malaysia, Mexico, Sultanate of Oman, the Russian Federation, Republic of Sudan, and the Republic of South Sudan agreed to extend the production adjustments for a further period of nine months, with effect from July 1, 2017.
The reductions will be on the same terms as those agreed in November.
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