Baku, Azerbaijan, Dec.4
By Leman Zeynalova – Trend:
There are three key factors which are critical for oil prices to gain strength, according to the Activity Outlook 2018-2020 released by Malaysia’s oil and gas company Petronas.
These are compliance by OPEC and non-OPEC on output cut accord; agility of US tight oil producers and sustained healthy level of oil demand growth, said the report.
The report said that in order for oil prices to continue improving, OPEC and non-OPEC need to demonstrate commitment to the production output cut level pledged in November 2016 of 1.8 million barrels per day
“Saudi Arabia is the largest contributor to the output cut in OPEC with 0.5 million barrels per day. For Non-OPEC, Russia has pledged the largest cut of 0.3 million barrels per day. Malaysia has also committed to reduce its oil production by 20 thousand barrels per day,” said Petronas.
The company analysts believe that the response from the US tight oil players is also key to price recovery.
“So far, the US tight oil producers have been agile to capture the opportunities from higher crude oil prices. In latest Short-Term Energy Outlook (STEO) report published by US Energy Information Administration (EIA) in November 2017, US crude oil production is expected to increase from 9.2 million barrels per day in 2017 to 9.9 million barrels per day in 2018, 0.7 million barrels per day or 8 per cent increment,” said the report.
New production from tight oil producers can reach the market in shorter time and with less investment, according to the analysts.
On the demand side, the report said that sustained healthy global demand growth will facilitate oil stock drawn down and subsequently, hasten global oil market rebalancing.
“Currently, global oil demand is recorded at 98 million barrels per day and is expected to grow by 1.4 million barrels per day in 2018. 57 percent of the demand growth contributed by Asia Pacific region mainly from China and India,” said the report.
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