Baku, Azerbaijan, March 2
By Leman Zeynalova - Trend:
Overall compliance with OPEC/non-OPEC deal is expected to remain high through to the end of 2018 and maybe even into 2019, Spencer Welch, director of the oil markets and downstream team in the London-based IHS Markit told Trend.
“Conformity has been very high through 2017, which has surprised most oil market observers. The main issues have been low level of compliance by Iraq, but this has been made up by the oil production declines in Venezuela,” said the expert.
Welch pointed out that the threats to extending the deal would be prices above $70 per barrel and continued oil inventory falls.
“But we don’t think this will happen, we think inventories have stopped falling. I don’t expect prices to rise above $70 per barrel, certainly not on a sustained basis until well after 2020,” said the expert.
The reason for this is the rapid rise in US crude production, which will keep a lid on prices, he explained.
Regarding the overall market situation, Welch said that if one compares the market now to 2016, when prices went below $30 per barrel and the annual average was Brent price was $44 per barrel, then the oil market is a much more optimistic place now – oil inventories have dropped, demand is growing strongly and the market is balanced.
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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