Will current OPEC deal survive?

Will current OPEC deal survive?

Baku, Azerbaijan, June 15

By Leman Zeynalova – Trend:

One the one hand, given the tightness in the market and the fact that the inventories have reached the 5 year average that they had set as goal post, then that should technical call for them to call-off the deal, the US JP Morgan bank said in its report obtained by Trend.

“However, on the other hand, looking at our balances it seems the tightness in the market disappears in 4Q2018 and all the way into 2019 when markets could potential go back into surplus if they were to pull out of the deal which should call for them to stay in it a bit longer,” said the report.

For the OPEC members that can bring back modest additional supply, to be prudent the JP Morgan analysts have assumed Saudi Arabia, UAE, Kuwait, Iraq and Qatar, Algeria and Ecuador to return the 4.5 percent cuts to baseline production established in Dec 2016 as JP Morgan finds it difficult how the deal can realistically survive beyond December OPEC meeting once the real impact of Iran sanctions is clear.

“However OPEC and non-OPEC members are likely to bring back oil well ahead of that as usually collapse of a deal will never be officially confirmed. Even the easing of output cuts is a rare event and not happened that often in the past and getting OPEC members to increase output and not expecting the deal to technically end will be counter intuitive.”

The report says that Iran is a lynch pin in this deal and given the re-imposition of the US sanctions on Iran, it will be difficult to expect Iran to cooperate if OPEC was to make decisions on releasing extra barrels without taking them into consideration.

“In addition to that, we think the US will be the wild card in the run up to the OPEC meeting and immediately after that. President Trump, who has commented few times on OPEC artificially bumping up the prices, could decide to take action by releasing SPR barrels in order to offset the tightness in the market. This is likely to complicate the decision making process for OPEC,” said JP Morgan.

For the whole of OPEC though, the increases from oil producing countries including Saudi Arabia, Kuwait, UAE, Iraq, Qatar will offset most but not all of the declines from Iran and Venezuela in 2018 and 2019 especially if Venezuela was to continue declining at current pace all the way into 2019, according to the report.

That would reduce the spare capacity of the 5 Middle East oil producers to 2.56 million barrels per day in 2019 from 3.5 million barrels per day in 2018.

In December 2016, at a meeting of oil producers in Vienna, 11 non-OPEC member countries agreed to cut oil production by a total of 558,000 barrels a day. The agreement was concluded for the first half of 2017 and was extended until the end of the first quarter of 2018 at a meeting on May 25, 2017.

At the last OPEC meeting in Vienna, the agreement was again extended until the end of 2018. Azerbaijan supported the decision.

---

Follow the author on Twitter: @Lyaman_Zeyn

Subscribe to Trend in Google News! Subscribe
New customs post in Azerbaijan to speed up cargo movement along North-South corridor (PHOTO)
New customs post in Azerbaijan to speed up cargo movement along North-South corridor (PHOTO)
Azerbaijani fund presents concept for restoration of liberated territories
Azerbaijani fund presents concept for restoration of liberated territories
When Karabakh road infrastructure to be fully ready?
When Karabakh road infrastructure to be fully ready?
Loading Bars
Latest
Putin invites Israeli prime minister to visit St. Petersburg
Iran's Energy Exchange announces products to be on sale on October 24
Turkmenistan launches production of new types of paving slabs
Azerbaijani banks ramp up business lending since early 2021
Georgia and Ukraine talk cooperation within European integration
Iran reveals COVID-19 data for October 23
UK records another 44,985 new coronavirus cases
Tactical-Special Exercises of Azerbaijani Special Forces end (VIDEO)
First Vice-President Mehriban Aliyeva shares photos from visit to Zangilan with President Ilham Aliyev (PHOTO)
Azerbaijani, Iranian FMs talk recent relations developments
Members of Nizami Ganjavi International Center join call towards cop26
Arayik Harutyunyan's visit to Russia is solely private - embassy of Azerbaijan
NATO not ready for equal dialogue with Moscow - Russian defence chief
Saudi-led coalition says destroys Houthi vessels, bomb-laden boats site
Kazakhstan updates forecast for completion of grain harvesting
IRENEX shares data on sales of Sepahan Oil Company in energy exchange
EIB to help reduce COVID-19 effects on Georgian SMEs
Moscow comments on reports about holding Russia-Armenia-Azerbaijan summit on Nov.2021
Azerbaijan shares data on number of vaccinated citizens
Azerbaijan confirms 2,315 more COVID-19 cases, 981 recoveries
First Vice-President Mehriban Aliyeva shared footage from Zangilan visit on her Instagram page (VIDEO)
Turkmenistan to participate in EXPO-2025
Georgia and Ukraine sign protocol on economic cooperation
Weekly review of key events in Azerbaijan's ICT sector
Azerbaijan's liberated lands to contribute to expansion of TRACECA corridor - minister
Weekly review of main events in Azerbaijan's transport sector
Saudi Arabia targets net zero emissions by 2060
Russia registers an all-time high of 37,678 coronavirus cases in past day
Uzbekistan eyes foreign technology for better local polymer production
Turkmen delegation to pay working visit to Iran
Azerbaijan records growth in loan portfolio of local banks in 9M2021
Turkmenistan’s Turkmenbashi refinery eyes producing hydrogen
Azerbaijan, Singapore to co-op in construction of geostationary satellites
IRICA shares data on Iran's trade turnover with SCO member states
Iran sees increase in exports of non-oil products from Hormozgan Province
Weekly review of Azerbaijani precious metals market
Kazakhstan unveils trade indicators with its TOP-3 EU partners
Turkmenistan approves new procedure for allocating investments from Stabilization Fund
Azerbaijani MoD observes exercises in liberated Lachin district (VIDEO)
Russian Health Ministry greenlights joint COVID-19 and flu vaccination
Central Bank discloses volume of loans issued to Azerbaijan's districts
Georgia records surge in tourist visits from Uzbekistan
Tourist inflow from Kazakhstan to Georgia soars
Iran boosts exports through customs of Zanjan Province
Azerbaijan notes decrease in banking sector' profit
Azerbaijan sees rise in mortgage lending
Iranian currency rates for October 23
Weekly review of Azerbaijani currency market
Georgia releases data on COVID-19 cases for October 23
New customs post in Azerbaijan to speed up cargo movement along North-South corridor (PHOTO)
Azerbaijan, Armenia to sign new documents in Moscow
Azerbaijani oil prices increase
Georgia sees decrease in tourist inflow from Azerbaijan
Turkmen company to purchase material, technical resources via tender
Kazakh energy company opens tender to buy metal corners
Kazakh oil company opens tender to buy spares
Kazakh KazMunayTeniz opens tender for Caterpillar equipment maintenance
Azerbaijan's Central Bank unveils data on currency exchange operations for Jan. through Sept. 2021
Azerbaijani fund presents concept for restoration of liberated territories
EDB purchases bonds of Kazakh KEGOC JSC
US corporate workers to start returning to offices next month
Iran changes pricing of petrochemical products at its mercantile exchange
Iran's foreign exchange needs trigger to expand exports
Surge of energy prices puts Europeans in stalemate (VIDEO)
Chinese company opens massive eco-friendly mine in Serbia
Kazakhstan’s daily COVID-19 case count stands at 1,732
Georgian honey exports skyrocket, following COVID-ravaged year
Iranian envoy, head of Georgia's State Security Service meet
Turkey announces commissioning date for logistics center in Sivas (Exclusive)
US military eliminates one of Al-Qaeda leaders in northwest Syria
Mutation of Delta variant may be more transmissible: UK health agency
Biden, Macron discuss cooperation, to meet in Rome late October
India, UK working on free trade agreement: Harsh Vardhan Shringla at India Global Forum
Turkey reports 28,192 daily COVID-19 cases
G7 countries reach breakthrough on digital trade and data
India perhaps only G20 country to fulfil...: India ahead of COP26 climate summit
U.N. plane aborts landing as air strike hits Ethiopia's Tigray
Relations with India stronger than ever, says Maldives Defence Minister
Chronicles of Victory: October 23, 2020
Iranian delegation leaves for Tashkent to observe elections
UK PM Johnson says fresh COVID lockdown not on the cards
2 soldiers, terrorist killed in northwestern Pakistan's clash
Pfizer/BioNTech COVID-19 vaccine shows 90.7% efficacy in trial in children
Belarus, Kazakhstan discuss joint efforts to maintain regional security
Georgia, Turkey to set up joint air force plant
TURKIC.World project presented at media forum of Turkic Council (PHOTO)
Iran boosts transit via TRACECA corridor
French court annuls "treaty" with illegal Armenian regime in Azerbaijan's Karabakh
Azerbaijan's MoD inspects combat positions in liberated Kalbajar, Lachin districts (PHOTO)
Uzbekistan Airways opens tender related to local fire alarm system
Iran looks to enhance road development in Ardabil province
Main countries of origin for tourists arriving in Georgia
Spanish Gedepsa interested in growing olive plantations in Uzbekistan
Azerbaijan reveals number of mines, munitions found on its liberated lands (PHOTO)
Overview of Uzbekistan's retail trade turnover dynamics between 2010-2020
When Karabakh road infrastructure to be fully ready?
Armenians propagate Nazi Nzhdeh and accuse Azerbaijan of racism (VIDEO)
Relations With India Stronger Than Ever, Says Maldives Defence Minister
Bennett-Putin meeting lasted five hours, was warm and positive
Azerbaijan shares data on number of vaccinated citizens
All news