Oil: Will OPEC extend cut deal?

Oil: Will OPEC extend cut deal?

Baku, Azerbaijan, Feb. 24

By Gulgiz Muradova -Trend:

The Organization of Petroleum Exporting Countries will not extend its agreement again, Tom Pugh, the economist at British economic research and consulting company Capital Economics, told Trend.

"The stocks to consumption ratio will be very close to its five-year average by the end of 2018. As such, we expect there to be some sort of managed increase in OPEC’s output," he said, adding that the cartel may announce about it in June or closer to the end of the year.

In late 2017, OPEC and non-OPEC producers led by Russia agreed to extend oil output cuts until the end of 2018 in a bid to finish clearing a global glut of crude while signaling a possible early exit from the deal if the market overheats.

The producers’ previous deal, under which they are cutting supply by about 1.8 million barrels per day (bpd) in an effort to boost oil prices, expires in March 2018.

OPEC is expected to examine progress at its next regular meeting in June.

Pugh further added that OPEC’s refusal to extend the deal will be one of the reasons why oil prices will decrease in 2019.

"This is one reason, along with a sharp slowdown in the US output, why we expect prices to fall further next year," he said.

He noted that overall oil prices will fall back for three key reasons.

"First, supply will increase sharply. We have already seen dramatic increases in the US. Second, demand growth will slow as the global economy slows, led by China. Third, a stronger dollar will put some downward pressure on prices," he said.

He stressed that the end-2018 forecast of Capital Economics for Brent is $60 and end-2019 forecast is $55.

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