Baku, Azerbaijan, July 13
By Leman Zeynalova – Trend:
The 9-month extension agreed by OPEC and non-OPEC members in late May is the last, according to the forecasts of the US JP Morgan bank.
“We expect OPEC (and Russia) to return to a market share led oil policy from 2018 and continue to see growth in US shale, given efficiency gains,” said the report obtained by Trend.
While OPEC’s near-term preference is to stabilize the oil price at the expense of lost market share, JP Morgan experts think that if shale oil production keeps rising, OPEC members may be driven (to the extent they can self-justify) to protect market share.
“In order to gauge the impact of OPEC and shale on the outlook for international oil field development, we assume OPEC grows to 35 million barrels per day (from 32.5 million barrels per day in 2017), consistent with our view that Saudi Arabia can raise production to 12 million barrels per day and annual US shale growth of 1 million barrels per day to 2020,” said the analysts.
Saudi’s stance could harden as its fiscal outlook improves, JP Morgan believes.
“We think that Saudi aims to put itself in a stronger medium-term position to manage its geo-political agenda and oil market share with greater independence from oil price. On the critical path of that is lowering the fiscal oil break-even and diversifying the economy away from oil,” said the report. “If successful, we believe Saudi will be able to reduce its oil break-even to $42/bbl (from $67/bbl in 2017), assuming 10mb/day of production.”
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.
---
Follow the author on Twitter: @Lyaman_Zeyn