Baku, Azerbaijan, Jan.26
By Leman Zeynalova – Trend:
It is very likely that OPEC and non-OPEC countries, participating in the oil output cut deal may change their target, according to the report of the US JP Morgan Bank.
“The group might change their target of five-year average of commercial oil inventories in the OECD (Organization for Economic Co-operation and Development) countries to the stock levels seen five years ago,” said the report obtained by Trend.
JP Morgan’s revised balances suggest markets will reach the 5-year OECD stock average earlier than expected by OPEC.
“This is caused by OPEC deal unintentionally ending up tightening markets faster than they had initially planned for as demand helps absorb that extra barrel on the back of global synchronized economic growth,” the analysts believe.
And given the OPEC and non-OPEC commitment to the existing deal to extend to the end of 2018 as announced in the joint ministerial meeting in Oman, JP Morgan sees markets will remain supported in 1H18.
“However in 2H18, markets shall take count of the impact of higher oil prices on supply, potential impact on demand and also the OPEC deal being phased out discreetly as OPEC is not very efficient at announcing an end of production cut deal as opposed to announcing a production cut agreement,” said the report.
Further, JP Morgan analysts said that if OPEC were to walk away from their current deal and release those additional 1.5 million barrels of oil per day immediately into the market, it could put markets in a trajectory of rapid stock builds in 2H18 and there would be sell-off in prices as physical markets would weaken and speculative money would flow out rapidly exacerbating those moves.
Earlier, OPEC and several other non-OPEC producers reached an agreement to extend the production deal for a further nine months. This would shift the expiration date of the agreement from March to the end of 2018. The agreement is on the same terms as those agreed in November last year.
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